CGS International Securities Research Report
April 15, 2025
ISOTeam Ltd: Autonomous Painting Drones to Boost ISO
ISOTeam Ltd, a Singapore-based construction company, has been making significant strides in the building maintenance and estate upgrading industry. With a 19-year track record of undertaking over 860 refurbishment and upgrading projects for more than 7,200 buildings in Singapore, ISO has established itself as a key player in the market.
Investment Thesis
PATMI likely to triple in FY25F on post-Covid-19 contracts secured at higher margins and rise 26% in FY26F on utilisation of autonomous painting robots.
Commercialisation of BuildTech solutions is a re-rating catalyst, presenting new asset leasing revenue and geographical diversification opportunities.
Initiate with Add and TP of S$0.096; FY26F dividend yield attractive at 5.2%.
Leveraging Tech in a Recurring Business
Painting constituted c.30% of total work undertaken by ISO as at FY24. The company estimates the façade painting drone and indoor painting robots, which it expects to be deployment-ready in 1HFY6/26F, will be able to reduce painting-related costs by 30-40%. This will enable ISO to increase its market share, specifically in the coating & painting (C&P) segment.
BuildTech: Margin Uplift & Potential New Revenue Stream
ISO will receive 18 drones, comprising two surveying drones, three washing drones, and 13 painting drones. The painting drones are currently in the live testing phase and are estimated to be ready for internal deployment in 1HFY6/26. Based on scenario analysis, GPM could reach 27% assuming 100% painting drone utilisation.
Orderbook Supported by Government Initiatives
ISO’s business is highly recurring, supported by various government initiatives, such as the Façade Enhancement Programme, Home Improvement Programme (HIP), Neighbourhood Renewal Programme (NRP), Hawker Upgrading Programme (HUP), and Estate Upgrading Programme (EUP). The company’s order book grew 9.8% yoy in FY24, reaching a high of S$191.3m as at end-FY24.
Financials
Revenue (S$m): 110.4 (Jun-23A), 130.2 (Jun-24A), 133.7 (Jun-25F), 148.2 (Jun-26F), 167.5 (Jun-27F)
Operating EBITDA (S$m): 2.64 (Jun-23A), 9.51 (Jun-24A), 12.39 (Jun-25F), 17.11 (Jun-26F), 20.50 (Jun-27F)
Net Profit (S$m): 1.41 (Jun-23A), 6.51 (Jun-24A), 6.65 (Jun-25F), 10.37 (Jun-26F), 11.93 (Jun-27F)
Valuation and Recommendation
We initiate coverage on ISO with an Add rating and target price of S$0.098, representing 51% upside potential from the current price. We like ISO for its:
Strong recovery in margins
First-mover advantage in autonomous façade/indoor painting robots
Construction upcycle in Singapore
New revenue and geographical diversification potential of its BuildTech solutions
Key Risks
Supply chain disruption – reliance on imported materials exposes ISO to risk of global supply chain disruptions
Regulatory changes and risks associated with the use of foreign labour
Environmental risks – more volatile weather brought on by climate change and weather events could disrupt project timelines and damage ongoing works
SWOT Analysis
Strengths:
First-mover advantage utilising AI-driven workforce – lowers cost structure and allows ISO to be more competitive
Long track record and credibility owing to 19 years of experience in the building maintenance and estate upgrading industry
Well-positioned to secure public sector projects as the exclusive paint applicator for Nippon Paint Singapore for HDB, JTC, and National Parks projects
Weaknesses:
Market dependency – ISO is heavily reliant on the Singapore market, making it vulnerable to local economic fluctuations
Reliance on imported raw materials and foreign labour
Opportunities:
Commercialisation of BuildTech solutions provides new asset leasing revenue and geographical diversification opportunities
Growing demand for sustainability has increased focus on green building practices, creating more business opportunities for ISO’s renewable solutions segment
Threats:
Regulatory changes regarding building regulations, environmental standards, or manpower laws could impose additional costs or challenges
Economic Volatility – Economic downturns can impact construction budgets and project funding
Key Management
Anthony Koh Thong Huat – Executive Director & CEO
Anders Teoh Kok Ann – Chief Operating Officer (COO)
Richard Chan Chung Khang – General Manager, Managing Director (ISOTeam Renewable Solutions), Director (ISOTeam BuildTech)
ESG in a Nutshell
ISO is committed to ESG practices, evident in its green product offerings, adoption of solar energy at its headquarters, and comprehensive Scope 1 and 2 emissions disclosures. The company has received recognition within the construction industry and has been awarded the Green and Gracious Builder Award by the Singapore Contractors Association Limited (SCAL) for several years.
Disclaimer
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