Ever Wondered Who Helps Repaint Our HDB Flats?












ISOTeam Ltd (SGX: 5WF) was founded in 1998 and is considered an established player in the building maintenance and estate upgrading industry in Singapore.


Basically, they are the “go-to” guys for having repaint our HDB flats. Listed on the Catalist in 2013, the local-based contractor currently has an equity value of S$61.2 million with a current P/E ratio of 10x.


ISOTeam’s revenue is mainly driven by its Repairs & Redecoration (R&R) and Addition & Alterations (A&A) businesses. R&R includes repainting, redecoration, repairs and waterproofing & reroofing which accounts for 70% of total revenues; A&A’s business segment is driven by the Group’s involvement with Singapore’s Neighbourhood Renewal Programme, Hawker Upgrading Programme and Estate Upgrading Programme. Since FY2011 (fiscal year ends in Jun), ISOTeam’s revenue has grown at a 41.8% CAGR from S$24.5 million in FY2011 to S$70 million in FY2014 as order book expanded. ISOTeam’s business tend to generate recurring income unlike its construction company counterparts since repairs, repainting and maintenance works have to be carried out once every few years.


As at end Jun 2014, the Group has a total order book of S$73.2 million, providing it revenue visibility over the next 2 years.


What sort of competitive edge does ISOTeam have?

  • ISOTeam’s business is considered niche as most construction companies tend to focus more on construction services and civil engineering. These companies such as Koh Brothers Group Ltd (SGX: K75) and Tiong Seng (SGX: K2P) generally do not diversify into what ISOTeam does. Even if new entrants would enter the market, they would have to match the quality which ISOTeam has already built and imprved over the past 15 years. Competitors offering the lowest cost contracts for bidding might not necessarily win.
  • Having completed more than 230 R&R and 2,500 A&A projects, the Group has well established relationships with key customers including town councils, government bodies, statutory boards ( HDB and NEA) and private sectors (property owners and developers).
  • Moreover, the Group has also established relationships with SKK and Nippon Paint Singapore since 1998 and 2004 respectively which provide ISOTeam the required distribution and financial support. Nippon Paint Singapore has recently increased its stake from 2.63% to 5.93% through a shares placement totalling S$1.4 million.


Any key risks faced by the Group?

  • Similar to local construction companies, ISOTeam is reliant on foreign labour and a shortage of supply would induce further cost pressures to the Group. Moreover, net profit margins are already low and have historically ranged between 0.6% to 12.5% during FY2011 to FY2014. Most of their projects have been sub-contracted (accounting for >50% of total cost of sales) in order to reduce their internal headcount. Currently, the Group has employed > 400 workers supporting various projects.
  • Another key risk is the loss of exclusive rights with SKK and Nippon Paint Singapore. The Group is the exclusive applicator of paint works for SKK in R&R projects and SKK is one of the major customers of the Group as well. A termination of SKK and Nippon Paint Singapore might affect the financial performance and financing of the ISOTeam’s business.


Value in Action

ISOTeam’s business might appear unappealing to investors but the Group does generate a steady flow of income given the need to maintain, repaint and repair public and private properties in Singapore.


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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.





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