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Is ISOTeam an undervalued stock?

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ISOTeam is a Catalist listed stock which I have been wanting to cover for a long time but had not done so because I was under the impression that the company is in small player in the building and construction industry. However, I found out recently that I was wrong.

Company background

The company is actually an established player in the building maintenance and estate upgrading industry in Singapore. ISOTeam has over 15 years of Repairs & Redecoration (R&R) and Addition & Alteration (A&A) experience, and has successfully undertaken more than 300 public and private sector R&R and A&A projects involving close to 3,000 buildings. ISOTeam is also the exclusive applicator of paint works for both SKK and Nippon Paint in the public housing sector in Singapore.

I like ISOTeam for its competitive strengths in its strong track record of project completions, early mover in eco-conscious solutions and diversified capabilities in servicing residential, commercial, industrial and institutional segments. All these strengths enabled ISOTeam to repeatedly winning tenders for public sector projects even when they are not the lowest in price.

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Share price performance

ISOTeam launched IPO in July 2013 with 32.2 million shares at 22 cents each. For the past three years, the share prices increased steadily from $0.22 to $0.30 based on the strength of increasing revenue and profits. I like this sort of company because its share price reflects the actual business performance.  Below are the key financial highlights:


FY13: $48.2 million

FY14: $69.9 million

FY15: $81.7 million

Net attributable profits

FY13: $6 million

FY14: $6.1 million

FY15: $8.1 million

Return on Equity

FY13: 41%

FY14: 23.5%

FY15: 17.5%

On 17 February 2016, ISOTeam announced record levels of revenue, profit and order book as at halftime 2016. For the six months ended 31 December 2015 (“HY2016”), the Group registered a 4.7% increase in attributable net profit to S$4.3 million on the back of a 14.7% revenue surge. The improved performance is due to the rapid expansion in business activities as a result of its aggressive acquisitions.

My valuation of ISOTeam

Usually, I don’t invest or monitor companies with less than 5 years of published financial results. However, after taking a look at ISOTeam’s balance sheet and cash flow, I am very surprised to find that it is actually very attractively priced now. The Net Current Asset Value Per Share (NCAVPS) is actually $0.22 while the Net Asset Value is $0.34. The company is hoarding on to cash pile of $32 million and has sufficient fund to more than settle its debt of $5.3 million. The net cash generated from operating activities amounted to approximately $5.4 million.

Given that the share price is trading at $0.30 now, I would set my entry-level at $0.26 to provide some level of safety margin.

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