ISOTeam and Tender results

This is going be quite a boring post. So if you are looking for a good read, and not pore through tonnes of data regarding ISOTeam, this post may not be for you.

Warren Buffett is known to study the rail car traffic (read here), instead of the boisterous clatter from Wall Street. It seems that rail car traffic is most closely linked to changes in quarterly GDP.

Peter Lynch is famous for his scuttlebutt approach (read here) to analyze the company and its business. The Scuttlebutt method is about the personal observations and insights that investors get by going out and gathering information about the company and its products / services.

I have even read in some blog posts that mentioned a friend of the blogger counting the number of used chop sticks at Umi Sushi to gauge how profitable the business is (that may be a bit extreme I think).

ISOTeam focuses on two segments, namely repairs and redecoration works, which are focused on the refurbishment and maintenance space as well as the redecoration and painting space, and addition and alteration works, which comprises structural and non-structural works including Neighbourhood Renewal Programmes and Hawker Upgrading Programmes.

ISOTeam is a newly listed company, and it is not common to read news about it from analysts. Often the analysis is from a ‘helicopter’ / top down view from its business model and financial performance. Indeed its financial performance has been good so far, and it appears to have a defensible and recurring business model.

• ISOTeam Stellar FY15 (read here)
• ISO Team Can Probably Benefit From The Singapore General Elections (read here)
• ISOTEAM: Defensive business with potential FY15 record profit (read here)
• ISOTeam: Strong recurring income from Singapore’s R&R and A&A needs (read here)
• ISOTeam posts 34.1% rise in profit for FY2015 (read here)

However, a reader reminded me that sometimes we ought to get our hands dirty and really look at the number of tenders the company has obtained (can be quite boring and tedious). It is important to study how good ISOTeam is when compared to its competitor, despite what most of the analysts say. Having said that, I came across the following articles:

• Article dated 16 April 2015, stating that the company has been awarded six new R&R contracts in the public sector worth approximately $29.24 million and another three private sector projects worth $1.87 million. (read here)
• Article dated 29 May 2015, stating that the company has been awarded five new contracts from various town councils in Singapore totalling an aggregate of $24.83 million. (read here)

ISOTeam first made impression when it hit the Catalist Board on 12 July 2013.
Below are the Subsidiary Companies of ISOTeam (click here to see presentation slide – refer to page 3):

1. Raymond Construction Pte Ltd
2. ISO-Team Corporation Pte Ltd
3. TMS Alliances Pte. Ltd.
4. ITG-Green Technologies Pte. Ltd.
5. ISO-Seal Waterproofing Pte. Ltd.
6. Zara @ ISOTeam Pte. Ltd. (51% owned by ISOTeam)
7. ISOTeam Access Pte. Ltd.
8. ISOTeam C&P Pte. Ltd.
9. ISO-Landscape Pte. Ltd.
10. Industrial Contracts Marketing (2001) Pte. Ltd.

On October 27, 2014, ISOTeam announced that it has acquired 4 local companies (read here):

1. Accom International Pte Ltd,
2. Accom Pte Ltd.
3. Industrial Contracts Marketing Pte Ltd,
4. Rong Shun Landscape & Construction Pte Ltd.

With the new listing and acquisitions, I wonder if ISOTeam has indeed obtained more contracts. After all, with the new capital and new subsidiaries – there might be economy of scale and increased competitiveness in bidding for jobs.

In its 2014 Annual Report, it stated that their customers include:

• Town councils
• Government bodies •
• Statutory boards (HDB and NEA)
• Property owners (Residential, commercial, industrial and institutional)
• Developers
• Main contractors

In a June 2014 Analyst report (read here), it states that the group’s principal customers (by percentage of revenue for 1H13) were:

1. Various town councils – 61.8%
2. SKK – 20.3%
3. NEA – 5.2%

Reading articles about ISOTeam, I am aware that SKK Pte Ltd do award projects to the subsidiary companies of ISOTeam (eg. ISO-Team Corporation ) – read here. This is a bit hard to track. On the other hand, public tenders for maintenance works are easier to track. This website informs us of the results of the public tendering exercise (click here).

For month of Sept 2015:

• Reroofing works at Nee Soon South Division. Yet to be awarded. Closing date 4 Sept 2015 (read here): ISO-Seal Waterproofing Pte. Ltd is not the lowest bidder.
• Repairs and redecoration works at Queen’s Close. Yet to be awarded. Closing date  4 Sept 2015 (read here): TMS Alliances Pte. Ltd is the 2nd lowest bidder.
• Repairs and redecoration works at Jalan Rumah Tinggi. Yet to be awarded. Closing date  4 Sept 2015 (read here): TMS Alliances Pte. Ltd is not the lowest bidder.
• Repairs and redecoration works at Sembawang Division. Yet to be awarded. Closing date  18 Sept 2015 (read here): TMS Alliances Pte. Ltd is the 2nd lowest bidder.
• Repairs and redecoration works at Marsiling Division. Yet to be awarded. Closing date 25 Sept 2015 (read here): TMS Alliances Pte. Ltd is not the lowest bidder.

 

For month of Aug 2015:

• Repairs and redecoration works at Bukit Panjang, Bukit Timah & Ulu Pandan Divisions. Yet to be awarded. Closing date 11 Aug 2015 (read here): TMS Alliances Pte. Ltd is the highest bidder.
• Repairs and redecoration works at Nee Soon Central Division. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Repairs and redecoration works at Chong Pang Division. Yet to be awarded. Closing date 11 Aug 2015 (read here): TMS Alliances Pte. Ltd is not the lowest bidder.
• Repairs and redecoration works at Nee Soon East Division. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Repairs and redecoration works at Bedok North / Upper Changi. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.

 

For month of July 2015:

• Repairs and redecoration works at Dover Crescent. Yet to be awarded. Closing date 24 July 2015 (read here): TMS Alliances Pte. Ltd is not the lowest bidder.

 

For month of June 2015:

• Repairs and redecoration works at Compassvale Road. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Repairs and redecoration works at Telok Blangah Crescent & Jalan Bukit Merah. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Repainting in Nee Soon Town. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Reroofing at Bedok North Road / Street. Awarded to ISO-Seal Waterproofing Pte. Ltd. (read here)
• Reroofing at Sims Place. Awarded (read here): Not awarded to ISO-Seal Waterproofing Pte. Ltd.

 

For month of May 2015:

• Repairs and redecoration works at Bedok North Road/ Avenue 4. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Repairs and redecoration works at Compassvale Lane / Walk. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Electrical Load upgrading at Potong Pasir Avenue. Awarded (read here): Not awarded to ISO-Team Corporation Pte Ltd.
• Repairs and redecoration works at Jalan Bukit Merah. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.

 

For month of April 2015:

• Neighbourhood renewal project (Big project of approx. SGD 4+ million) at Woodlands.  Awarded (read here): Not awarded to ISO-Team Corporation Pte Ltd.
• Repairs and redecoration works at Punggol Field / Edgedale Plains. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Neighbourhood renewal project (Big project of approx. SGD 3+ million) at Boon Lay Drive.  Awarded (read here): Not awarded to ISO-Team Corporation Pte Ltd.
• Repairs and redecoration works at Punggol Field. Awarded (read here): Not awarded to TMS Alliances Pte. Ltd.
• Repairs and redecoration works at Compassvale Walk. Awarded to TMS Alliances Pte. Ltd. (read here)

 

The above shows the tenders which ISOTeam participated. Looking through the tender lists, they reminded me of how competitive this market is (even for the dull, un-glamorous maintenance projects). There are many players.

In addition, judging from the 6 months tenders, ISOTeam did not obtain that many tenders (at least as compared to what I have anticipated)…

Especially when you compare to the earlier report in May 2015 stating that the company has been awarded five new contracts from various town councils in Singapore totalling an aggregate of $24.83 million. (read here). What I see from the above 6 months records, showed 2 awarded projects with total contract sum of less than SGD6 mil. Probably I have missed out some. Also SKK might have awarded ISOTeam some public projects as well, but then again base on the 6 months record, I did not see any tenders being awarded to SKK Pte Ltd.

There may be another source to track other pubic tenders. So again, I may have missed out some of the awarded projects base on this exercise.

Most of ISOTeam projects are public sector projects. I feel that the public tenders are a double edge sword:

• On one hand it is very close to an open tender where almost any companies (the good and bad) can bid for the job unless their financial and technical standings are really very bad (in contrast to some private developer tenders which may only allow a selected few companies to bid eg. close tender – often these companies have worked with the developer before). Basically brands are not important since the services are about basic maintenance – we are not talking about high end condos whereby the developers have to engage certain supplier / contractors for specialized products & services eg. Philippe Starck, German Kitchen wares, or Japanese Contractors with specialized machinery etc.
• While on the other hand, upon being awarded, the contractor can feel assured that the earnings will not likely be defaulted (after all the clients are government linked Town Councils).

Ok, I think the quantity of projects is one thing. However, I always feel that when you are in a open public tender, you tend to get all kind of contractors. Some may be too aggressive in their bidding.. so much so I wonder how their tender price can cover their cost (not to mention profits). So winning base on the lowest bid that is economically unprofitable is not a good thing (sometimes don’t know whether to be happy or sad for those contractors which got the projects). However, on the other hand, there must be projects to have earnings.

How successful, efficient or profitable the company is – can only be seen in the long run. 

I may be splitting hair here, but well for this post I am just recording down what I can find.

If I remember correctly, ISOTeam is the only one of such contractor (doing repair and maintenance of estates) being listed here. I feel that ISOTEAM is making the right move so far. Having equity derived capital in an environment of rising interest rate is a smart move (over your competitors). Over time, rising interests will bring down the poorly managed and financed companies. Also from the company’s perspective, paying low dividend makes more sense than paying increasing interests to banks.

However having said that, capital in the hands of the wrong management is very dangerous- esp. when the company is listed. This is because the market is a very unforgiving creature. It does not tolerate lousy companies, no matter what positive image analysts paint. In the long run, it is a weighing machine. And if the company does not deliver, stock prices will crash, investors will question. Still less bad than banks chasing after the company for money but the situation is a bit tricky when some of the bigger investors are their working partners or customers eg. SKK and Nippon.