Brokers’ take: RHB believes worst is over for ISOTeam, upgrades to ‘buy’

RHB on Thursday (Sep 15) upgraded ISOTeam to "buy" from "neutral" as it believes the worst is finally over for the building maintenance company.

The research team's target price on the counter remains unchanged at S$0.12, implying a potential upside of 23.7 per cent from ISOTeam's last traded price of S$0.097 as at market close on Thursday.

RHB expects profitability to return as ISOTeam managed to obtain contracts with appropriate margins for FY2023 which account for the rise in labour and raw material costs.

"In addition, most of the kitchen sinking and write-offs exercises have likely been incurred and should be absent in FY2023," RHB said.

It noted that ISOTeam had a "tough" FY2021 and FY2022, with FY2022 seeing a one-off impairment and lower margins due to a sudden surge in operating and raw material costs.

Contracts that were negotiated in the past thus became unprofitable, resulting in ISOTeam's net loss of S$10 million in FY2022.

As at Jun 30, ISOTeam's order book stood at S$160.2 million, with projects that are expected to support the group's activities through FY2024. This consisted of projects won post-Covid-19 at an appropriate pricing strategy, ISOTeam said on Aug 26 during the release of its FY2022 financial results.

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