Wednesday 30 October 2019

ISOTeam AGM 2019

This year's AGM is held at Sheraton Towers again in a ball room with about 120 seats at ~80% full.

The AGM started at 10.02 am with a video clip on an overview of ISOTeam business and introduction of board members. 

After that is the Q&A session. 

Q: Big fluctuations on earnings between 2018 and 2019. What are the key factors that contributed to this?

A: ISOTeam has a fixed cost to maintain in terms of overhead expenditures. Managed to reduce that in 2019. 

Q: Any loss-making projects? 

A: No. 

Q: A&A segment went up alot and that segment contributes a big chunk of the revenue. Is this the focus of ISOTeam going forward?

A: A&A is a big margin segment. Moving forward ISOTeam will continue to focus on this segment. 

Current overall orderbook for ISOTeam is about S$140 million. 

Q: Can throw some colours on Pure group? How will they boost ISOTeam? 

A: Pure group is a project management company. ISOTeam is not project manager. We are just a contractor. The S$40 million MBS project is from Pure group and ISOTeam is their contractor and this is not the first time ISOTeam is working with them. 

80% of Pure group business is in Singapore and rest of the 20% is in Thailand, Malaysia and China. 

Q: Regarding SG bike. Is it easier for ISOTeam to just buy the busted bike company (Mobike) instead of buying SG bike?

A: ISOTeam is buying the bikes from Mobike only, not the business of Mobike.

ISOTeam paid about S$350 per bike when setting up SG bike. 

However ISOTeam paid about S$20 for each Mobike bicycle after nett of licensing fee and refundable deposit to LTA.

Following is my opinion: (I think back then when ISOTeam set up SG bike, Mobike has not gone bust yet so this question of buying over Mobike is not really relevant.) 

Q: Government is pushing for BMW (bike, MRT, walk) initiative. Bike might not be as popular a choice. What do ISOTeam think? 

A: ISOTeam is very positive on the bike business. ISOTeam is the only full licensed bike operator now. 

Currently on weekends, all SG bikes are fully taken up.

When the bike count is increased after buying over Mobike bicycles, it should get even better because more bikes can be deployed to other housing estates. 

Q: Operating cash flow every year is negative. 

A: Mainly related to timing difference. Payment timing from customers. But since the government is the major customer, there is little risk of default. And government's payment term is 3 months whereas ISOTeam need to pay their sub contractors first. 

Another reason is also due to working capital for larger contract values now. 

Q: Proposed a lower fixed amount for the 3 founders' salary and a higher variable bonus component as a motivation for management to perform better. 

A: 3 of them don't get the same salary. They have different functions so they received different fixed pay. Variable bonus is devised in such a way that they get the same amount.

Q: Gross profit margin can be further improved from the current 15 - 16%?

A: Is sustainable and can be further improved. 

Q: Has all the savings been realised from the consolidation of operations and company office? 

A: ISOTeam has reduced from 6, 7 different places to one place now. 

The company is also applying for a higher quota to house more workers together. It is pending government's approval. Each worker approved can save the company about 200 bucks per month. 

Q: Any comment on the recurring income streams of ISOTeam? 

A: That is currently quite minimal. Solar Nova 1 is ending soon and ISOTeam is discussing with Sunseap on the maintenance of their solar systems and with Pure group in place, they are discussing with Sunseap on project management next time. 

Q: Is SG bike already profitable? 

A: Operationally broken even. With more bikes coming in things will improve further. 

Q: Is the geopolitical situation affecting ISOTeam? 

A: 99% of ISOTeam business is in Singapore so not affected negatively. 

Q: R&R margin used to be very good in 2015 and 2016. Can ISOTeam improve to that margin again? 

A: 2015 and 2016 are election years. After that the government tenders became smaller in contract value. 

Previously R&R contributed about S$20 million. But this year it already has S$60 million order. 

Q: Any upcoming big HIP project? 

A: Just completed one. Another one about 20% completed.

Q: What is the fair value gain of other investment? 

A: Investment in Sunseap. Fair value stated in accordance to FRS. 

Q: Is ISOTeam trying to expand outside Singapore by buying Pure group and going into project management? 

A: Most of ISOTeam business comes from the government. Stable income comes from them. 
ISOTeam is also moving towards becoming a one-stop soution provider as a turnkey player.

Q: Why are Goodwill and Intangible Assets treated differently? How are they classified? 

A: Both are related to previous acquisition of a company (not Pure group). Items are classified according to FRS. 

After the Q&A session is the customary voting of resolutions.

All resolutions passed with vast majority. 

The AGM ended at 11.15 am. 

As per previous years, the chairman and CEO stayed behind to mingle and answer further questions. 

This is the hallmark of a sincere and responsible management team. 

I had the chance to discuss with Anthony, the CEO on several issues and found him to be candid in his replies as per previous discussions. 

I personally like him as a CEO as I feel he has a very clear vision of the company and how to move it forward. Also feels that he is an 'on the ground' person who can resonate with the lower levels instead of someone who is sitting in an ivory tower. 

There are of course, couple of stuff that have been discussed which I don't think should be revealed in a public blog. 

But those, along with what I heard in the above Q&A, make me decided to continue holding on to the shares and actually make me looking forward to the near future of ISOTeam. 

Lastly I apologise if there is any incoherence or grammatical / spelling error in the above post. 

I have been having diarrhoea since this afternoon (4 times and feeling coming again..) and is rushing out this post using mobile phone.

Happy reading and hope it helps. 

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