ISOTeam Ltd (SGX: 5WF) is an established player in Singapore’s building maintenance and estate upgrading industry. The company has 20 years of experience in providing repairs and redecoration (R&R), and addition and alteration (A&A) services. To-date, it has completed a total of 1,284 R&R projects for public housing (322) and private residences (962). In Singapore, the company is an exclusive paint applicator for Nippon Paint Singapore and SKK Singapore for the public housing sector. ISOTeam also offers specialist coating and painting (C&P) services and complementary niche services, such as waterproofing, interior design, landscaping, and mechanical and electrical (M&E) works. Earlier…
ISOTeam Ltd (SGX: 5WF) is an established player in Singapore’s building maintenance and estate upgrading industry. The company has 20 years of experience in providing repairs and redecoration (R&R), and addition and alteration (A&A) services. To-date, it has completed a total of 1,284 R&R projects for public housing (322) and private residences (962).
In Singapore, the company is an exclusive paint applicator for Nippon Paint Singapore and SKK Singapore for the public housing sector. ISOTeam also offers specialist coating and painting (C&P) services and complementary niche services, such as waterproofing, interior design, landscaping, and mechanical and electrical (M&E) works.
Earlier this month, I had the chance to meet the management of ISOTeam to learn more about the company and its growth plans. Here are 10 things I noted:
1. For the financial year ended 30 June 2017 (FY2017), ISOTeam’s revenue slipped 11.9% to S$82.9 million. The decline was mainly due to a 48.1% fall in R&R revenue to S$20.9 million. Anthony Koh, ISOTeam’s chief executive officer, said that lesser tenders called by town councils for R&R activities resulted in the lower revenue. The sudden dearth of tender opportunities has never happened before, to his knowledge. Koh added that the town councils might have shifted their focus during the year to concentrate on other works such as estate upgrading (where R&R works might have been included under another programme) and lift upgrading.
2. ISOTeam usually undertakes 20% of a project in-house and outsources the rest to sub-contractors and suppliers. This arrangement gives the company more flexibility and allows the experts in their own fields to do what they do best. With some in-house expertise, ISOTeam is also not at the mercy of its suppliers as the company can deploy its own workforce to a site if there are any issues. Another advantage of having an in-house team is that ISOTeam can serve as a check on the workmanship, quality, and price for a project.
3. A big R&R or A&A project for ISOTeam would range from S$5 million to S$10 million per contract; anything lesser than S$5 million is usually considered a small project. But, the overheads for both big and small projects are often the same. Therefore, it would make more sense for ISOTeam to go for the bigger projects. Having said that, the company still takes on smaller projects to maintain its close relationship with the various town councils.
4. The other business arms of the company – such as C&P, interior design, landscaping, and M&E – help to mitigate declines in the R&R and A&A sectors in any particular year. If management knows that there are lesser R&R and A&A projects by town councils in a year, ISOTeam can focus its efforts on the other business arms. As such, ISOTeam’s multi-disciplinary capabilities and comprehensive services helps the group to weather through different cycles, and positions it to tap onto opportunities.
5. Nowadays, government project bidders do not have to be the lowest tenderer to win a project. Government agencies are focusing on quality and management, on top of price, when awarding tenders. This method recognises capable contractors, and is a fairer system with a focus on quality and on-time delivery. For example, for the renovation works on the market and food centre at 84 Marine Parade Central, ISOTeam was not the lowest bidder, but it was recommended and awarded the project due to the PQM (Price Quality Method) scoring. There have been many other cases in ISOTeam’s history where it won tenders despite not being the lowest bidder.
6. ISOTeam has done R&R works for the same blocks at Bukit Purmei, Yishun, and Tampines four times throughout its operating history of 20 years. This shows the company’s vast experience in the industry.
7. ISOTeam started as a supplier and contractor for Nippon Paint Singapore and SKK Singapore. The paint manufacturers signed on ISOTeam as their exclusive paint applicators after the company kept on winning jobs. The paint manufacturers also wanted to maintain their market share and bring in a reliable partner. Another reason for the link-up is for the provision of joint warranties, where both the manufacturer and contractor provide warranties for a project. This ensures that if one party is no longer operating, the other party can still offer the assurance.
8. 90% of ISOTeam’s clients are recurring, and the R&R and A&A segments are recurring too. There will always be projects out there to bid for. For example, it is a government regulation that the external walls of buildings have to be repainted every 5 years. It is also a government policy to upgrade the hawker centers or estates every 12 to 15 years.
9. Competitors in the R&R sector include Eac Giftbuild Pte Ltd and BM Building Pte Ltd. For the A&A sector, competitors include CBM Pte Ltd and Exclusive Design Construction Pte Ltd. These are all non-listed companies. ISOTeam has a 30% market share in the Housing & Development Board’s Neighbourhood Renewal Programme, after having completed 21 projects.
10. In April 2017, ISOTeam purchased a new premise in Changi to house its corporate headquarters (HQ) and all the offices of its subsidiaries. The building is expected to have its Temporary Occupation Permit granted by the end of this month, and the company should be moving in by mid-April. ISOTeam spent about S$4 million to perform A&A to increase the gross floor area of the building by around 1,200 square metres. The purpose of the new HQ is to improve cost efficiencies and bring the employees from ISOTeam’s various subsidiaries together. There will be significant cost savings just from combining the overheads. The company has around 600 labourers, and it hopes that half of them can be housed in a new dormitory it is hoping to set-up in the new HQ. By having the workers come together, the coordination of its workforce needs for various jobs will be much easier.
There is more that I picked up from ISOTeam’s management and I will be sharing more notes in the near future. Stay tuned! [Editor: More notes on the meeting with ISOTeam’s management have been published. They can be found here.]
Meanwhile, there are 28 surprising and important things we think every Singaporean investor should know--and we've laid them all out in The Motley Fool Singapore's new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge--simply click here now to claim your copy.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in ISOTeam Ltd.