It's your friendly neighbourhood ISOTeam

THE pundits have divined that Singapore will hold its General Election in a year or so, and that typically means more business for Catalist-listed ISOTeam.

The building maintenance and estate upgrading company stands to clinch more repairs and redecoration (R&R) contracts whenever town councils decide to give their neighbourhoods a facelift.

ISOTeam chief executive Anthony Koh told The Business Times: "We are confident and very positive over the next six months; you're going to see something good. Our order book is growing very well.

"And I think the government will have to push out more R&R projects. These are programmes welcomed by all the residents, to upgrade the estate with a fresh coat of paint."

R&R is ISOTeam's bread and butter, and refers to non-structural construction, improvements, landscaping and routine maintenance works. Originally, ISOTeam was simply a paint applicator but painting is just 30-40 per cent of R&R work today, Mr Koh said.

Comeback year

Over the last two years, ISOTeam's net profit suffered as R&R revenue halved to S$20 million a year, instead of the usual S$40 million in better times.

The slowdown is over and this will be the year that ISOTeam reclaims its market share, Mr Koh told BT at the firm's new office in Changi North.

Public sector calls for tender for R&R projects have been rising since July last year, and the project sizes are back to normal, Mr Koh said. Earlier, contracts had dwindled as the government required time to adjust its various R&R programmes, and expand the Home Improvement Programme (HIP), which addresses common maintenance problems for Housing Board flats.

Now, the timeline and budget for HIP have been finalised. Clarity has returned for estate rejuvenation contractors after last year's National Day Rally.

"And to be very frank we also made some adjustments to our tendering strategy and are happy to see the results," Mr Koh said.

"We're bringing down the gross profit. Originally when we tender we mark up 20 per cent, now we mark up 15 per cent. Lower gross profit doesn't mean lower net profit - we have a net profit target to meet by managing cost. We talk to our regular suppliers and subcontractors, ask for more support in terms of pricing."

Mr Koh is going for volume; more and bigger contracts. His strategy is to do more "cross-selling" between business units that ISOTeam has acquired in recent years.

For instance, ISOTeam's two HIP contract wins in January 2017 and 2019 relied on cross-selling between its R&R, A&A, home maintenance and other capabilities. (A&A, or addition and alteration, refers to structural works and infrastructure works.)

"Each HIP project is close to S$30 million. We foresee we will get another two to three more HIP this year or early next year," Mr Koh said.

ISOTeam also relied on its interior design, mechanical and electrical engineering expertise to clinch a S$46.54 million project from Marina Bay Sands last year: "We offered a package and won the project. Your client would rather liaise with one party instead of two or three ... If we do a good job, handover by this April, it's likely a bigger-sized job will come in. They got a few hundred million dollars of budget every year to do upgrading."

Today, ISOTeam wins one out of every three jobs it tenders for. Last year, the win rate was one out of 10. The group's order book is fatter than ever at S$142.98 million.

Trusted hands

Often, ISOTeam will win a tender even though it's not the lowest-cost operator, like with the HIP win earlier this month. Mr Koh said: "Town councils, besides pricing, they emphasise quality and management. My people are all well-trained."

Uniquely, ISOTeam specialises and focuses on R&R, and has built a 25-year track record around that. ISOTeam's project managers are experienced working on "live buildings", and possess skillsets that their peers from the small R&R branch of a larger building and construction firm may lack.

Working on a live building can be more difficult than raising one up from vacant land, Mr Koh explained: "When you build a building, you can have a piece of land you barricade up and for S$500 million over the next three to five years, you can do what you want; nobody cares. But for us we work on 30 blocks of flats at Tampines. We have to manage the residents, manage the noise, the dust, safety controls. We minimise complaints and we know how to handle them."

Another advantage is that out of the seven big paint manufacturers here, two - Nippon Paint and SKK Paint - are ISOTeam's exclusive partners for the public housing sector. (Nippon Paint Singapore also owns a 5.6 per cent stake in ISOTeam.)

R&R contractors are required to team up with the paint companies because repainting projects come with a five to seven-year warranty to the town councils and the HDB. Mr Koh said: "They (the paint manufacturers) don't want any Tom, Dick and Harry to represent them."

ISOTeam's coatings and paintings works (C&P) business is growing too. The group has moved beyond external wall and floor painting, to focus on niche markets like high-performance coating and fire-protection coating. Since sales began in July last year, fireproof coating work has contributed nearly S$7 million to its order book.

Solar-charged

ISOTeam has also become a leading contractor for solar panel installations, and is in talks to draw up a long-term maintenance programme with solar player Sunseap, as soon as Sunseap completes its first project for HDB.

This could involve washing solar panels and checking cables every three to six months.

ISOTeam stumbled into the solar sector quite by accident, Mr Koh said.

Sunseap's original subcontractor for its first HDB project in 2016 suffered a slew of complaints after starting work without serving notice to residents, and plunging through a roof, causing water leakage. The Tampines Town Council then introduced Sunseap to ISOTeam, which has re-roofing and waterproofing expertise. ISOTeam took a small job from Sunseap and completed it three months early, within budget and without any complaints. Since then, Sunseap has awarded ISOTeam close to 200 blocks.

In 2017, ISOTeam invested S$5 million in Sunseap, tying in a clause that half of all the installation work it wins must go to ISOTeam. Sunseap is expected to complete an initial public offering by the end of this year.

In Singapore, solar power systems are not subsidised. Firms like Sunseap fund the capex themselves and earn that back over time from energy harvesting. With technology improvements, Sunseap can get back a full return on investment in around six years instead of 12.

In any case, the national goal is to install solar panels on top of as many HDB blocks as it can.

"There's huge potential for the next 10 to 15 years," Mr Koh said, and has his sights set beyond the neighbourhood skyline.

Sunseap just gave ISOTeam a S$11.31 million contract to install Singapore's largest offshore floating solar farm, and Mr Koh is eyeing another floating project tender at Ubin that's 10 times as big.

"Sunseap is very confident they have this know-how, and we are the early mover with Sunseap," Mr Koh said. The float is a joint patent between ISOTeam and HDB.

Over time, after the initial capex is laid down, the net profit margin from solar installations is expected to be much better than for R&R, he added.

Estate heroes

In line with its mission to be a "total solutions provider" for town councils, its key customer base, ISOTeam launched SG Bike, a bike-sharing joint venture in 2017.

The fleet of 3,000 bicycles gets close to 2,200 users a day. Trip data has improved after the Land Transport Authority said that users who park illegally will be fined.

SG Bike was the first player here to use geo-fencing to fine riders if they failed to return the bikes to a proper "geostation".

Mr Koh said: "We were suffering in the beginning but now they (competitors) are adopting what we did ... When we started we were the only bike-sharing company supported by the government. If everybody can control it properly this is a very profitable business."

SG Bike will not expand quickly, however, as the LTA is also in an "adjusting status" now and rules are being revised.

For its next act, ISOTeam will try to rid all estates of cockroaches.

It just needs another three to six months for the National Environment Agency to clear the Cockroaches & Odour Remover (CnO) for sale here.

The organic product which ISOTeam has licensed to sell here has already passed the food grade test and biodegradable test. Efficacy has already been proven in a 2016 trial when CnO was fogged into four HDB bin chutes.

Hotels and kitchens in Malaysia and Bangkok already use it. Farmers spray it on pigs that have cockroaches crawling on their bodies.

Mr Koh said: "It's a game-changer when this product gets approved. All the pesticides will be gone. Our main focus is the HDB blocks' refuse chutes. Every two to three weeks go and spray, it's a huge job."

The town councils like CnO because their routine chemical fogging is not effective at all.

He said: "They say if they spray too often, the cockroaches run to the coffeeshops, to the ground floor units. A lot of complaints will come. But if you don't spray, you will invite complaints. That's why they have to go through the motions. Sometimes they spray water."