Brokers' take: RHB downgrades ISOTeam to 'neutral', lowers target price to S$0.12

RHB has downgraded its "buy" call on ISOTeam 5WF to "neutral" after the building maintenance company reported a net loss of S$14.5 million in the financial year ended Jun 30, 2021, due to supply chain disruptions and labour shortages from Covid-19's impact.

The brokerage has also slashed its target price of the Catalist-listed business by nearly half to S$0.12 from S$0.21.

Despite the "conservative" downgrade, analyst Jarick Seet believes "the worst should be over" for ISOTeam and expects a turnaround in FY2022 due to its order book of S$165.2 million on Jun 30, 2021, and the likelihood of the company tendering for more contracts as projects pick up.

Seet recommended investors adopt a wait and see approach, preferring to be "prudent" and "monitor and assess if the situation improves for H1 FY2022" due to the threat of the Omicron variant.

Looking ahead, he believes ISOTeam's revenue will continue to rebound stronger as the company executes more projects.

The analyst is also positive on the company's use of drones in building facade inspection, repairs and painting, as he believes this could help to improve its productivity and manpower deployment.

Nonetheless, Seet has lowered profit estimates for FY2022 and FY2023 by 70 per cent and 65 per cent, respectively, to account for the margin compression caused by Covid-19.

He noted that the fluidity of the Covid-19 situation may continue to impact construction of new projects. Singapore's infection control, the rate of vaccination in the coming months and delays from additional safety measures and policies could further affect the company margins, he said.

As at 11.44 am on Monday, shares of ISOTeam were trading flat S$0.112.

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