• Maintain BUY with an unchanged DCF-derived Target Price of SGD0.31, 32% upside plus 2% FY20F (Jun) yield.
• ISOTEAM (SGX:5WF) recently secured SGD31.04m worth of contracts involving project works from the different divisions within the group. The various contracts are expected to be completed between Nov 2019 and Mar 2021.
• We remain confident on ISOTeam as it could be a key beneficiary of the upcoming general election and it may also level up its playing field with the acquisition of Pure Group (if completed).

Architectural Works at the Lentor MRT Station

• Out of SGD31.04m worth of contracts, SGD18.18m are for addition and alteration (“A&A”) projects which include the construction and maintenance of architectural works at the Lentor MRT station. Located along the Thomson-East Coast Line (“TEL”), the MRT station is built underneath Lentor Drive. Stage two of TEL, which connects commuters to the Circle Line, is targeted to open in 2020.
• Total contract wins in 1QFY20 aggregates to SGD51.3m which includes SGD20.26m worth of projects announced on 30 Jul. It comprises projects valued at SGD12.99m that consist of repair and redecoration (“R&R”) works to blocks 29 and 34 at Rivervale and Pasir Ris area, and SGD4.03m of contracts for the supply and application of painting for the Bukit Batok neighbourhood.
• As of 31 Jul 2019, ISOTeam's orderbook was SGD113.5m, a slight drop from SGD132.8m at 31 Jan 2019. However, the intake this quarter has already surpassed four out of six half-year intakes during the FY16-18 period.

Potentially More A&A/R&R Opportunities Leading Up the Singapore General Election (“GE”)

• While the polls must be held by Apr 2021, we think the GE will be held next year. We believe there will be initiatives coming up on the improvement and enhancement of the liveability and the environment for the residents. Hence, ISOTeam could be a key beneficiary of the GE as volume usually picks up pre & post-election.

Maintain BUY With An Unchanged DCF-backed Target Price of SGD0.31

• We look towards more resilient earnings from ISOTeam as it is poised to ride on the Government initiatives, as well as the expansion plans of the two IRs from the group’s recent acquisition of Pure (if completed).
• The acquisition of Pure has also turned ISOTeam into a turn-key commercial fitting-out solutions provider, improving the chances of winning more projects.
• Key downside risks (if the deal falls through): Reduced order intake, lower margins, and a negative outlook of the building maintenance and estate upgrading industry in Singapore.

Source: RHB Invest Research - 25 Sep 2019