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ISOTeam

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I have previously written an article on ISOTeam, a facilities maintenance company based in Singapore. This article is to provide an update on the latest developments of ISOTeam.

On 31 May 2016, the company announced the securing of private and public sector contracts worth $26.32 million. The contracts will have a positive impact on the earnings per share and net tangible assets per share for the current financial year ending 30 June 2016.

Company’s profile

ISOTeam’s capabilities lie predominately in the property maintenance and property upgrading and restoration. The entry barrier for this industry is not high, therefore in order to differentiate itself from their competitors, ISOTeam’s niche is in providing eco-conscious solutions.

In recent years, the company has secured a lot of public works and has established good track record with town councils, statutory boards, main contractors and developers. Due to this, ISOTeam is able to repeatedly win tenders for public projects even though their offers are not the lowest in price.

investments

Strategies for growth

Going forward, ISOTeam’s growth strategies are to develop more green solution offerings, expand through acquisitions and reach out their services to other untapped private and public sectors. These strategies make sense as Singapore government plan to green mark 80% of the building in Singapore. Thus, there are a lot of opportunities for ISOTeam to grow if it pursues the green technology path.

Between February to April 2016, ISOTeam has filed in SGX a series of shares buy-back at price between $0.305 to $0.310. By 1 April 2016, the total number of accumulated shares from acquisitions amounted to 3,680,000. Normally when a company buy-back its shares, it may be the case that the management feel that the shares are undervalued. But is it really the case? Let’s review the financials of ISOTeam.

Financial performance

For the half year ended 2015, ISOTeam’s net profit was $4.54 million, an increase of 11.4% from the previous year. Cash-flow is healthy with net cash generated from operating activities at $5.374 million. Cash balances is $32.9 million, more than sufficient for total debts of $5.317 million. While the balance sheet is reasonably sound and the business is profitable, is it worth investing in ISOTeam now?

My Strategy

Based on the issued shares of 284,665,955, the Net Current Value Per Share (NCAVPS) is $0.110. Given that there was a one-for-one bonus share issued on 29 February 2016, ISOTeam’s share price has done surprisingly well. The share price has maintained at the $0.31 level since the bonus shares were issued. So this means that ISOTeam investors would have a windfall because their invested capital would have increased 100% in value!

I did not invest in ISOTeam and obviously I have missed the boat. Nonetheless, ISOTeam’s recurrent business model and its growth story make a compelling case for investment. I would set my entry level at $0.22.

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SG Wealth Builder

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