Two stocks, ISOTeam and Sunpower with potential bullish stock charts (5 Nov 2019)

This week, two stocks, namely ISOTeam and Sunpower caught my attention with their potential bullish chart developments amid volume expansion.

1. ISOTeam

Chart looks positive with strengthening indicators and volume

Based on Chart 1 below, ISOTeam has been trading in a range $0.225 – 0.245 since 2 Aug 2019. ADX is starting to rise (closes at 18.7) amid positively placed DIs. In addition, indicators such as MACD, OBV and RSI are strengthening. MACD has done a bullish MACD line crossover and centerline crossover. A sustained breach above $0.245 with volume expansion is positive for the chart with an eventual technical target $0.265.

Near term supports: $0.235 / 0.225 / 0.220

Near term resistances: $0.245 / 0.255 / 0.275

Chart 1: Volume picks up amid strengthening indicators

Source: InvestingNote 5 Nov 2019

Other interesting aspects of ISOTeam

a) Average analyst target price $0.320; potential capital upside 33%

Based on Figure 1 below, ISOTeam is covered by three brokers with all buy calls. Target price ranges from $0.31 to $0.34. Average analyst target is around $0.320. This represents a potential capital upside of around 33%. Readers can refer to ISOTeam’s analyst reports HERE.

Figure 1: Average analyst target $0.320

Source: Bloomberg

b) Other factors

Personally, there are other noteworthy potential developments in the near term which I find it interesting.

  • Completion of M&A for Pure Group cum funding exercise for the acquistion. ISOTeam has extended the completion date to 30 Nov 2019. During the AGM held on 30 Oct 2019, I get the feeling that ISOTeam is committed to complete this earnings accretive acquisition, as they believe Pure Group is a synergistic fit with ISOTeam. In addition, Pure Group has a profit after tax targets of $3.0m for FY20 and $5.0m for FY21. To put this in perspective, ISOTeam’s FY19 net profit is $6.8m.

  • More contract wins. This month, Sunseap clinched a contract from HDB and the Singapore Economic Development Board to install more than 170,000 solar panels at 1,218 HDB blocks and 49 government sites. Based on a Businesstimes article dated 14 Jan 2019, it was reported that with ISOTeam’s $5m investment in Sunseap in 2017, there is a clause whereby Sunseap has to award 50% of the installation work to ISOTeam. According to a 17 Feb 2016 contract win announcement by ISOTeam, Sunseap awarded a $1.8m contract to ISOTeam to install solar panels on 33 HDB blocks. Conservatively speaking, if ISOTeam were to get a 1/3 share (instead of 50%) to install the solar panels on 400 HDB blocks, a back of the envelope calculation works out to be around $21.8m contract. Besides this, ISOTeam has shared that their outlook remains bright with many contracts open for bidding, especially as we near election.

  • A final dividend of around $0.0042 / share will be ex on 8 Nov 2019. This translates to approximately 1.8% dividend yield at the closing price $0.240.

  • Readers can refer to ISOTeam AGM’s takeaways HERE.

c) Risk factors

Some of the possible risk factors include but not limited to a broad market selloff; failure / long postponement of their acquisition of Pure Group; illiquidity which can lead to large price swings etc.

2. Sunpower – challenges its multi-month resistance $0.525

Bullish chart

Based on Chart 2 below, Sunpower has been trading in a multi month trading range $0.415 – 0.525 since 23 May 2019. ADX closes at 34.5, amid positively placed DI. All the exponential moving averages (“EMAs”) are rising, indicative of an uptrend, with golden cross formations. Volume has been picking up recently. RSI closes at 68.5 which is not overbought yet. For Sunpower, RSI can easily touch 84 before it turns lower. Past 10-year high RSI is at 92.0. A sustained break above $0.525 points to an eventual technical measured target of around $0.640. This is an eventual technical target which is unlikely to reach immediately.

Near term supports: $0.520 / 0.510 / 0.500

Near term resistances: $0.535 / 0.550 / 0.575

Chart 2: Chart looks bullish with rising ADX & EMAs and strengthening indicators

Source: InvestingNote 5 Nov 2019

Other interesting aspects of Sunpower

a) Analyst target price $0.830; potential capital upside 58% – 85%

UOB Kayhian is the only broker covering Sunpower with a target price of $0.830. Smartkarma has a target price of around $0.970. This represents a potential capital upside of around 58% – 85%. Readers can refer to the analyst reports HERE and Smartkarma’s report HERE.

b) Attractive valuations

Based on Bloomberg, Sunpower trades at 7.3x current PE vis-à-vis its 10-year average of 10.1x. I.e. This seems attractive if we compare against its 10-year average PE.

c) Sunpower’s positive outlook in FY19 and beyond

According to Sunpower’s 2QFY19 results, Sunpower shares the following developments outlined below which may bode well for FY19:

  • The continued ramp-up of existing GI projects, driven by: a) Continuous securing of new customers following the mandatory closure of small “dirty” boilers and relocation into industrial parks, and b) The organic growth of existing factories in industrial parks served by the Group’s GI plants. In this aspect, an article on Businesstimes dated 8 Jul 2019 corroborates this trend. It cites Hebei, China’s top steel making province has brought forward the closure of small coal fired industrial boilers by two months to the end of October 2019.

  • Yongxing Plant, acquired in Q3 2018, is expected to contribute for the full year, particularly as its profitability has been enhanced by post-acquisition upgrades.

  • Full year electricity sales by Changrun Project.

  • Lianshui Project is expected to make further progress by adding new customers in 2H 2019.

  • Start of trial production by Shantou Project Phase 1 in 2H 2019.

  • Contributions from the newly-acquired Suyuan Plant.

  • Potential accretive M&A of GI plants that can contribute immediately to the top and bottom-line.

  • Strong M&S order book

d)Risk factors

Some of the possible risk factors include but not limited to a broad market selloff; project execution risk; higher leverage from expansion; forex etc.


The above is written on the basis of technical chart. To my best effort, I have included in some updates for ISOTeam and Sunpower so as to give you some of their near term potential developments. Readers, as usual, please do your own due diligence and exercise your independent judgement.

P.S: I have already notified my clients to take note of ISOTeam and Sunpower respectively. I am vested in both for trading purposes only.

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here


Please refer to the disclaimerHERE

$ISOTeam(5WF.SI) $Sunpower(5GD.SI)

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Sunpower on the next leg up.. After consolidation around 50c to 52c... Plus healthy volume so far this morning

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Hang Seng & STI have fallen close to 2,900 & 250 points in one month! (28 May 19)

Dear readers,

Asian markets have fallen quite a bit in the past one month. For example, Hang Seng has fallen close to 2,900 points since touching a high of 30,280 on 15 Apr to trade 27,391 which is the low last seen in January.

STI has fallen almost 250 points from an intraday high of 3,415 on 29 Apr to close 3,165 today.

Looking at the indices may be deceiving as many shares have fallen a lot. For example, based on Table 1 below, most stocks have fallen at least 10%, with Sembmarine tumbling almost 17% in less than a month.

Table 1: % fall since 29 Apr vis-à-vis indices

Source: Ernest’s compilations

Note: The calculation in the % chg does not exclude dividends distributed during the above comparison period. I.e. If UOB’s $0.70 / share dividend is included, the % chg will be lesser. It is noteworthy that 29 Apr is chosen as the intraday high as this is the day which STI hit its multi-month high record.

My personal view – I have increased equity exposure

With reference to my write-up two months ago (click HERE), I was around 5% invested in late March. I have been trading somewhat in and out for the past two months. However, the sharp fall in specific stocks seems to create some interesting opportunities and I have recently raised my percentage invested to more than 100%.

These are my thoughts

a) Hang Seng (26,868-27,200), STI (3,150-3,160) and S&P500 (2,800-2,816) are trading at some good support region thus it lends some confidence to me to buy some shares. Having said that, I will not know for sure whether the support will definitely hold. If the support area breaks, there may be more downside. Thus do exercise your own risk management and judgement call;

b) The stocks which I enter are either at multi year low prices, or they are trading at extremely oversold levels, or they are potential turnaround plays (clients are notified of my positions);

c) For myself, I intend to trade most of the positions which I have. In other words, I am cognisant that market is jittery now hence any potential upside (if any) may not be large;

d) I was not extremely invested going into May hence I have more leeway to deploy my funds;

e) It is noteworthy that should U.S. and China trade tensions worsen, or if the technology cold war worsens, markets are likely to weaken more. Thus, I emphasise the need to do careful risk management and utilise your own judgement calls.

I have generated two tables for readers’ reference

I have generated two tables below and have appended the top five stocks in each category for readers. Table 2 lists the top five stocks sorted by lowest RSI. (Clients will receive the entire list of stocks sorted by RSI with RSI <=30 as the main criteria.) The five most oversold stocks are Thomson Medical, AA Group, Banyan Tree, Tee International and GSS Energy. In fact, Thomson Medical has a RSI of 4 which is pretty rare for companies with no apparent negative news except for perhaps weaker than expected results; high valuations etc.

In addition, it is noteworthy that Thomson Medical and GSS Energy are trading at prices lower, or just around the prices before their major announcements. For example, Thomson Medical was also trading around S$0.05+ before its acquisition of Thomson Medical & TMC Life Sciences Berhad and GSS Energy was also trading around $0.07 before it was awarded the KSO for Trembul fields. Naturally, some readers may argue that their acquisitions, or their major announcements may not have added value to shareholders. This is a personal judgement call and I guess we can only tell over the long term.

Table 2: Most oversold stocks sorted by RSI

Source: Bloomberg 28 May 2019

Table 3 lists the Top 5 stocks by total potential return. (As usual, clients will receive the entire list of stocks) Sunpower, SIIC, OUE, Yoma Strategic and Banyan Tree rank as top 5 stocks sorted by total potential return. Please refer to Table 3 and the important notes below.

Table 3: Top 5 stocks by total potential return

Source: Bloomberg 28 May 2019


1. Presence of analyst target price and estimated dividend yield;

2. Market cap >=S$200m


1. This compilation is just a first level stock screening, sorted purely by my simple criteria above. It does not necessary mean that Sunpower is definitely better than SIIC or OUE in terms of stock selection.

2. Even though I put “ave analyst target price”, some stocks may only be covered by one analyst hence may be subject to sharp changes. Also, analysts may suddenly drop coverage;

3. Analyst target prices and estimated dividend yield may be subject to change anytime, especially after results announcement or after significant news announcements;

4. For Sunpower and Yoma Strategic, I noticed that the estimated dividend yields provided by Bloomberg do not seem to be accurate and I have used the previous full year dividend divided by the last price to derive estimated dividend yield.

Important caveat

Naturally, my market outlook and trading plan are subject to change as charts develop. My plan will likely not be suitable to most people as everybody is different. Do note that as I am a full time remisier, I can change my trading plan fast to capitalize on the markets’ movements (I am not the buy and hold kind). Furthermore, I wish to emphasise that I do not know whether markets will definitely rebound or continue to drop. However, I am acting according to my plans. In other words, my market outlook; portfolio management; actual actions are in-line with one other. Notwithstanding this, everybody is different hence readers / clients should exercise their independent judgement and carefully consider their percentage invested, returns expectation, risk profile, current market developments, personal market outlook etc. and make their own independent decisions.

Also, please note that at the time of this write-up, among the aforementioned stocks, I have positions in Sunpower, GSS Energy and Thomson Medical.

$Sunpower(5GD.SI) $GSS Energy(41F.SI) $Thomson Medical(A50.SI)

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here


Please refer to the disclaimerHERE

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ISOTeam – on the verge of a bullish break from a potential double bottom formation! (21 May 2019)

Previously, I have done a write-up (click HERE) on ISOTeam (“ISO”) after interviewing Anthony, CEO and Richard, GM on an exclusive basis in Dec 2018. I have bought in at that time and have taken profit in Jan 2019. Since Apr, I have been accumulating ISO, as its chart seems to portend a potential upside breakout after a lengthy potential double bottom formation. ISO closed at $0.230 on 21 May 2019. Let’s take a look at its investment merits and more importantly, its investment risks below.

Investment merits

a) Potential bullish break from a double bottom formation

Since 2017, ISO has experienced a protracted downturn in its share price. For the past five months, it has been consolidating between $0.191 – 0.225. At the time of doing this write-up, ISO seems to be on the verge of staging a bullish break after a lengthy potential 5-month double bottom formation. Neckline is around $0.225. Since 29 Apr 2019, except for two trading days, volume has been increasing and has been above its 30D average volume, as it approaches the resistance region $0.225. Indicators such as MACD, OBV and RSI are generally strengthening in line with the recent up-move. Amid positively placed directional indicators, ADX has been rising from 8.5 on 12 Feb 2019 to close 35.3 on 21 May 2019, indicative of a trend. Except for 200D SMA and 200D EMA, other short term EMAs (20D,50D,100D) are rising. A sustained upside breakout above $0.225 with volume expansion points to an eventual technical measured target $0.260. Conversely, a sustained breakdown from $0.191 with volume expansion points to an eventual technical measured target $0.157. Based on the current chart development, a bullish upside breakout scenario is more likely.

Near term supports: $0.215 / 0.205 / 0.195 / 0.191

Near term resistances: $0.225 / 0.240 / 0.250 / 0.275

Chart 1: ISO on the verge of breaking out from a lengthy potential double bottom formation

Source: InvestingNote 21 May 2019

b) C&O segment may have interesting development in the next few months

ISO has an interesting business segment called Eco-friendly solutions. In this segment, ISO has a cockroach and odour removal (“C&O”) segment which is undergoing tests with the relevant authorities for use in rubbish chutes. According to an article in Today dated Mar 2017 (click HERE), this is a targeted, odourless, environmentally friendly and more effective in reducing cockroaches. A beneficial side effect of this C&O solution is that it helps to reduce methane level in rubbish chutes (high levels of methane is one of the main causes of rubbish fire). Based on my personal guess, we are likely to hear more updates on this segment in the next few months.

c) Contract wins remain strong

Since Nov 2018, ISO has been winning contracts on a furious pace with a cumulative amount $94m awarded. It is noteworthy that FY18 and FY17 revenue amounted to $83.8m and $82.9m respectively. According to ISO’s 3QFY19 financial statements, management is optimistic about the overall sentiment and outlook for their business and they will continue to leverage on their strengths to win more contracts.

d) CY2020 may be interesting years

Calendar year 2020 (note financial year ends in June) may be an interesting year for ISO. Firstly, there may be potential disposal gains, as management plans to unlock value by selling two properties at Kaki Bukit and Serangoon. Such sales if materialise, may result in an approximate $3m gain. Secondly ISO has invested $5m into Sunseap via its Series C preference shares in May 2017. Should Sunseap IPO in 2019 – 2020, ISO may be able to get good returns from its investment. Thirdly, as a normal course of business, ISO is on the lookout for potential earnings accretive merger and acquisition opportunities. Fourthly, ISO’s SG bike seems to be the only company left with the full licence after OFO’s licence was cancelled by LTA on 22 Apr 2019. Separately, Mobike indicated in Mar 2019 that it has applied to surrender its bicycle-sharing licence. Thus, SG bike may be able to perform better in the next few years amid a reduction in competition.

e) Investment community seems to be finally taking note in ISO

ISO is slowly getting the attention of the investment community and media. For example, Straits Times has published two articles this month in relation to ISO, either directly or indirectly. On 4 May 2019, Sunseap was featured on Straits Times (click HERE) as the builder of one of the world’s first and largest sea water floating solar platform along the Straits of Johor, north of Woodlands Waterfront Park. For those who do not follow ISO, it is noteworthy that ISO is the installer for this project (see announcement HERE). On 19 May 2019, ISOTeam was featured in Straits Times with the tag line “ISOTeam building on its capabilities for greater growth” (click HERE).

Its turnaround is also catching the attention of RHB analyst who is the only rated broker covering ISO. Last week, RHB upgraded ISO to buy and increased his target price from $0.230 to $0.290 (click HERE). He also projects S$2.0m net profit in 4QFY19F. If this materialises, it will be ISO’s fourth consecutive quarter on quarter growth in net profit since 4QFY18!

f) Valuations seem attractive on a historical basis

Based on RHB’s report, if ISO can report FY19F net profit of around S$5.8m, at its last price of $0.230, it is trading at 11.3x FY19F PE. This compares favourably to its 5-year average PE of around 21.6x. In addition, on a P/BV ratio, ISO is trading around 1.0x P/BV vis-a-vis its 5-year average P/BV of around 1.9x. Thus, valuations look attractive on a historical basis.

Investment risks

Please take a look at my write-up on ISO (click HERE) for the risks. Some of the pertinent risks are

a) Chart reading is extremely subjective

Chart reading is subjective and is likely to be less accurate for small mid cap stocks, especially those with low volume.

b) Ultra-illiquid company

Ave 30D volume amounts to 157K shares only. This is not a liquid company where investors can enter or exit quickly. Amid the current volatile market conditions due to ongoing trade tensions, ISO may swing quite a bit if there are sudden sellers.

c)Results must catch up à which seems to be happening

Notwithstanding its contract wins of approximately $94m over the past six months which is already more than its FY18 revenue of $83.8m, earnings have to catch up. It is noteworthy that gross margins have dropped from 17.8% in FY18 to 14.0% in 1HFY19. This is a conscious effort by the management to reduce their margins for R&R contracts in order to get more volume of contracts. Other new projects which they are doing in CY2019 such as the $46.5m contract win from a leading integrated resort group and the floating solar platform from Sunseap should yield higher margins.

In view of the above, I have deliberately waited for ISO’s 3QFY19 results before completing this write-up. It is encouraging that ISO announced a S$1.7m net profit in its 3QFY19 results last week, amid strong recovery across all segments. It is noteworthy that ISO’s 9MFY19 gross margin has edged up to 14.4%, from 14.0% in 1HFY19. Furthermore, based on Table 1 below, ISO reported its second highest quarterly profit in 3QFY19 since 3QFY17! This is also the third consecutive quarter on quarter growth in net profit since 4QFY18. Thus, results may be finally catching up with contract wins.

Table 1: Second highest quarterly profit since 3QFY17

Source: Company; Ernest’s personal compilations

The above list of risks is not exhaustive

To keep my write-up concise and due to severe time constraints, the above list of risks is not exhaustive. Readers are advised to refer to the analyst reports HERE; ISO’s website HERE; ISO’s latest 3QFY19 financial results (click HERE); and my more detailed write-up (click HERE). You can also refer to ISO’s prospectus for more information on the risks etc. In addition, you can also contact ISO’s investor relation August Consulting if you have any queries regarding the company.


In conclusion, ISO continues to be interesting to me based on its chart (possible upside break from a potential bullish double bottom formation) and its business developments. Nevertheless, readers must be cognisant of (just to cite a few) illiquidity risk, risks relating to chart reading etc. Let’s see how it goes in the next few months.

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here

P.S: I have mentioned to my clients to relook into ISO on 7 May 2019 when it was trading around $0.215. This write-up was delayed due to severe time constraints and as I’m waiting for ISO’s 3QFY19 results.


Please refer to the disclaimerHERE


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ISOTeam trades near 4 year low despite record order books and bright outlook (10 Jan 19)

ISOTeam (“ISO”) caught my attention. Despite sitting on a record order book, ISO has tumbled approximately 44% from an intra-day high of $0.385 on 10 Apr 2018 to close near a four year low at around $0.215 on 10 Jan 2019. The share price decline was attributable in part to its 4QFY18 surprise loss announced in Aug 2018 (financial year ends in Jun). Nevertheless, my gut feel is that 4QFY18 should mark the trough in earnings and results should improve on a quarter on quarter basis in the next few quarters.

As this company is a potential turnaround play, I have arranged a 1-1 meeting with Mr Anthony Koh, Executive Director and Chief Executive Officer and Mr Richard Chan, General Manager (collectively, “Management”) last month. First, a description of ISO…

Description of ISO

ISO has grown from a company doing repairs and redecoration (“R&R”) & addition and alteration (“A&A”) projects in 2014 (when I first met them) to a multi-disciplinary company which provides complete solutions to the built environment. See Figure 1 below for its business segments.

Fig 1: ISO complete solutions provider

Source: Company

Key takeaways from the meet-up

1.4QFY18 loss was due to several factors, some of which are unlikely to be repeated

ISO reported a 4QFY18 net loss of S$2.0m in Aug 2018. Overall, FY18 net profit dropped 71% from S$6.4m in FY17 to S$1.9m in FY18. This drop was mainly attributable to the following factors, some of which are likely to be one off:

a) Resistant to change in bidding strategy for R&R projects resulting in less projects being awarded;

In FY18, there were less R&R projects put up by the town councils for public tender last year with more L2-grade jobs in the $1-2m range, which is a highly competitive space with many smaller players competing on prices. Amid the heightened competition, ISO has initially been resistant in changing its bidding strategy for R&R projects so as to maintain its gross margins for R&R projects to be above 20%. However, with the loss incurred in 4QFY18 (Apr – Jun), management has decided to change their bidding strategy by lowering their gross margin requirement by a few percentage points. Nevertheless, they believe that such change is necessary and beneficial for the group as a small sacrifice in margins is likely to bring about a significant increase in volume of R&R projects secured. This change in strategy is apparently successful as ISO announced on 19 Nov 2018 that they have clinched seven R&R projects worth S$10.8m. On 9 Jan 2019, ISO announced a further three R&R contract wins amounting to S$9.8m.

b) Start up investments in 1st HIP project;

ISO has incurred some start-up costs for its 1st HIP project such as buying 80 sets of temporary toilets (costs $5K each toilet), construction equipment, container office, platform etc. Some of these are one-time investments which they can be subsequently used for other projects. Furthermore, with the experience of its 1st HIP project, it is likely that they may get better margins for its subsequent HIP projects;

c) Some projects previously incurred losses but have either broken even or stabilised;

Overseas projects in Myanmar and Malaysia have incurred some losses in FY18. ISO has since reduced the headcount and has altered its strategies. For Myanmar, ISO is working with Singapore developers who want to develop projects in Myanmar. With Singapore developers, it is easier to do business and payment collection is easier too. For Malaysia, ISO has also significantly reduced its headcount. Together with its joint venture partner, they plan to change strategy to develop boutique project (i.e. develop a small piece of land with 50-80 units and sell à its partner’s forte) or / and manage foreign worker dormitory (ISO’s forte). As of now, both Malaysia and Myanmar businesses have stabilised.

ISO’s SG bike is one of the three bike companies (the other two companies are Chinese firms Mobike and Ofo to be awarded a full license by LTA. ISO has seen encouraging signs from SG bike. In fact, it has broken even in Oct 2018. Together with its partners, ISO intends to roll out family bikes in 1Q2019 along the parks to capture another segment of the market. In addition, SG bike may perform better in 2019 as Ofo seems to be having problems with cash flows, customer refunds etc. Furthermore, GrabCycle, one of the three companies to be awarded a sandbox licence, has decided to give up its sandbox licence.

In short, although it is unfortunate that ISO posted a 4QFY18 loss in Aug 2018, management views it as a “timely wake-up call” to all ISO workers to do their part to reduce cost, while not affecting quality. In this aspect, management is confident that all of their interests are in line with ISO’s shareholders to reduce cost, improve earnings while not affecting work quality.

2.Record order books – May get stronger…

With reference to its annual report (see Chart 1 below), its order book size is usually on average S$93.6m. However, it has recently been winning contracts. In the short span of less than two months, ISO has announced S$72m worth of contracts from 19 Nov 2018 through 9 Jan 2019! As of 9 Jan 2019, ISO’s order books have reached S$143m, the highest since the Group’s inception more than twenty years ago. This is approximately 1.7x of its FY18 revenue.

Chart 1: ISO’s order book trend

Source: Company’s annual report 2018

Management is positive that the order books can be maintained, or may even increase due to the following trends / developments:

a) Bright HIP project outlook

ISO has participated in the bidding for 2 HIP projects, one of which is known and announced on 2 Jan 2019. On 2 Jan 2019, ISO announced that it won its 2nd HIP project worth S$26.3m (its first HIP project clinched on Jan 2017 was around S$17.5m). My understanding is that the other HIP contract (in the bidding process) encompass three to four precincts, hence it is reasonable to assume that the contract size may be larger. However, there is no certainty that they may get the other HIP contract.

Besides the size of HIP project being larger, the number of HIP projects is likely to increase significantly due to two new developments. Firstly, HIP I has been expanded to include HDB blocks that had been built prior to 1997. Management believes this will open up opportunities for another 230,000 flats, equivalent to approximately 30 HIP projects a year! Secondly, the introduction of HIP II for flats which are 60-70 years old will open up another large pie for them to tender in the long term. As the flats will be older then, there may be more areas to upgrade which may naturally result in the contracts to be larger.

b) Visible increase in R&R projects

Management observes that there is a visible increase in R&R projects being up for tender. At a dialogue held as part of a welcome dinner at the inaugural Bloomberg New Economy Forum in Singapore in Nov 2016, our Prime Minister Mr Lee said it is always possible to bring the election forward (earlier than Jan 2021). Based on past observations, there seems to be an increase in R&R projects, or other projects up for tendering, ahead of the election. As ISO works with all 16 town councils in Singapore, this stands them in good stead when it comes to project bidding.

c) Sunseap spells opportunities for ISO

Based on an article on The Edge, Sunseap is building one of the world’s largest offshore floating photovoltaic (OFPV) systems to be located north of Woodlands Waterfront Park, along the Straits of Johor. Based on 9 Jan 2019 announcement, Sunseap has awarded the S$11.3m offshore floating solar project to ISO, comprising of the supply, design and installation of Offshore Grid-tied Solar Photovoltaic Systems. This is a milestone for both Singapore and ISO. The success of this project (to be completed by Sep 2019) is expected to open similar opportunities locally and around the region.

d) Largest single contract win $46.5m from IR group may herald other projects of such nature

In May 2018, ISO announced that it was awarded its single largest contract amounting to $46.5m from a leading integrated resort group with expected completion on Mar 2019. If they can successfully complete such a large contract on time, it may open doors to other contracts of such nature.

3.Cost savings of S$500K-S$1M on a steady state basis

ISO has just consolidated all its operations by shifting to Changi North in Apr 2018. Cost savings, stemming from venue rental, dormitory costs, reductions in operational and administrative expenses are likely to be seen in FY19F onwards with greater savings likely seen in FY2020 as ISO continues to streamline its operations. Cost savings may be around S$500K – S$1M on a steady state basis.

In addition, ISO is exploring the possibility of closing down, or streamlining certain business units because of duplication in capabilities. They are also exploring avenues to improve productivity through job redesign and retraining, as well as investing in talent by upgrading the skills of workers who have performed well.

4.Possibility of disposal gains

Based on its annual report 2018, management plans to unlock value by selling two properties at Kaki Bukit and Serangoon. Such sales if materialise, may result in an approximate S$3m gain.

5.Recurring income from energy-saving solutions

ISO announced on 25 Sep 2018 that it has entered into a collaboration agreement with Thai company Centerlise, to exclusively distribute and install Centerlise’s air centre hardware and equipment as well as its software systems locally. Based on ISO’s press release, Centerlise’s advanced algorithm cloud-based software automatically fine tunes air conditioning and water systems resulting in up to 30% in utility savings while maintaining optimum performance. Its application is compatible with any building with central air conditioning or chiller plants. Management believes that energy-saving solutions are highly relevant in this time and age amid climate change, and they are already seeing some encouraging response from potential customers.

ISO is not the only one interested in this segment. Based on a Bloomberg article dated 13 Dec 2018, KKR is putting in as much as S$45M in Barghest Building Performance (BBP), a Singapore provider of energy-saving solutions. (Management cites BBP as one of its direct competitors in energy-saving space) Going forward, this field is likely one of the areas where global private equity firms such as KKR, TPG and Bain Capital LP may focus on for their impact investing strategies. (Impact investing, in simple terms, is investing with the aim of achieving both financial return and social benefit)

6.Sunseap – potential IPO in 2019?

ISO has invested S$5 million into Sunseap via its Series C preference shares in May 2017. Based on an article published in South China Morning Post on 9 Aug 2017, Sunseap has plans to do an IPO as early as 2018. Should Sunseap IPO in 2019, ISO may be able to get good returns from its investment.

Valuations seem undemanding

In view of its bright industry prospects and potential new revenue streams, valuations seem undemanding for ISO based on Price to Book (“P/BV”). Based on Figure 2 below, ISO is trading at 1.0x P/BV vis-a-vis its 5-year average P/BV of around 1.9x. My personal view is that PE may not be such an accurate representation as 4QFY18 registered a shocking loss which resulted in FY18 net profit to be extremely low.

Fig 2: ISO 5-year valuations

Source: Bloomberg 10 Jan 2019


With reference to Chart 2 below, ISO is trading near 2014 lows. Chart is bearish with the down sloping exponential moving averages. However, indicators such as RSI, MACD and MFI are exhibiting bullish divergences. ADX closes at 16.9 amid positively placed directional indicators, indicative of a sideways trading pattern. My guess is even though chart is bearish, it may not drop too much given the low ADX and bullish divergences from the indicators. However, as ISO is extremely illiquid, it is extremely tricky to have an accurate picture. Thus, I will like to emphasise the above chart analysis is just a rough guide only.

Near term supports: $0.205 / 0.195 / 0.180 / 0.172

Near term resistances: $0.220 – 0.225 / 0.240 – 0.250 / 0.275

Chart 2: ISO at a 4-year low price

Source: InvestingNote 10 Jan 2019


As usual, there are many risks involved, especially in small caps. In my opinion, some obvious risks are execution risk, illiquidity risk and time horizon.

1.Execution risk

Execution is key to bring about the desired effects, ranging from project delivery, execution in new business segments, success in streamlining operations and reducing cost etc. Any serious hiccups in either of these areas may have an adverse effect on the company.

2.Illiquidity risk

Based on its latest annual report 2018, the top 20 shareholders have about 82.8% of ISO’s outstanding shares. Ave 30D volume amounted to around 49,000 shares only. This is not a liquid company where investors can enter or exit quickly. Against the backdrop of our volatile market, ISO may swing quite a bit if there are sudden sellers or buyers.

3.Time horizon

In my opinion, even if 4QFY18 marks the trough in operating performance, it may take some time for ISO (probably a couple of quarters) to generate good results on a year on year comparison. Nevertheless, my guess is that there is likely sequential (i.e. quarter on quarter) improvement in results, barring seasonal effects like Chinese New Year.

4.Valuations may be high if PE is used

With reference to Fig 2 above, using Bloomberg’s data, ISO is trading at 32.1x PE. However, it depends on which valuation measure one uses. My personal view (I may be wrong) is that PE may not be such an accurate representation as 4QFY18 registered a shocking loss which resulted in FY18 net profit to be extremely low.

The above list of risks is not exhaustive

To keep my write-up concise, the above list of risks is not exhaustive. Readers are advised to refer to the analyst reports HERE and ISO’s website HERE. You can also refer to ISO’s prospectus for more information on the risks etc. In addition, you can also contact ISO’s investor relation August Consulting if you have any queries regarding the company.


My personal view is that amid its strong order books, bright outlook for its business segments especially HIP, R&R projects, collaboration with Sunseap and Centerlise, it is likely to be a turnaround play in FY19F with more evidence of improvement likely to be seen in 2HFY19F. Nevertheless, readers have to be cognisant of (just to cite a few) illiquidity risk, execution risk etc.

P.S: I am vested in ISO and have informed my clients in Dec when ISO is trading around $0.195.

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here


Please refer to the disclaimerHERE


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Sunpower – price action & bullish divergence warrant a closer look (20 Dec 18)

Dear readers,

Some of you have sent me emails to express concerns whether I am still maintaining my blog, as I have not posted an article in the past couple of months. Thanks for the concern and emails. It warms my heart that there are readers who are actively following my blog. Something happened to my family which caused me unable to post articles on a timely basis. (My clients are still receiving some periodic short writeups on the market and specific companies during this period) Anyway, I am glad to be back to work this week!

This week, Sunpower’s (“SP”) price action and chart caught my attention.

Why did it catch my attention?

a) Bullish price divergence against the broad market

Recently, SP has been exhibiting bullish price divergence against the broad market. As STI and FSTS small cap index weaken to a two-week low, SP has closed near a two-week high of around $0.340;

b) Dec sell-off did not make a new low and bounce back quickly

Furthermore, it is quite assuring that during the sell-off in Dec, SP only touched a low of $0.275 on 10 & 11 Dec 2018 and bounced back rather quickly. It did not break the prior low of $0.270 established on 1st Nov;

c) SP seems to have breached a short-term downtrend

With reference to Chart 1 below, SP seems to have breached the short-term downtrend line. There is some volume accompanying the breach but time is required to ascertain whether the bullish breach is sustainable;

d) All the chart indicators seem to exhibit bullish divergences

If I compare the lows set on 1 Nov 2018 and 11 Dec 2018, all the chart indicators (such as MFI, MACD, RSI, OBV) which I use, seem to be exhibiting bullish divergences. This is pretty rare and corroborates the bullish break;

Near term supports: $0.320 / 0.300 / 0.280 / 0.270

Near term resistances: $0.340 / 0.365 / 0.380

Chart 1: SP breaches its short-term downtrend line

Source: InvestingNote 20 Dec 18

Some other notes (non-technical chart) on SP include

a) SP is hosting a Special General Meeting on 28 Dec 2018, Fri 10am for the proposed adoption of the share buyback mandate. This is interesting, as companies usually will wait to propose this in their AGM (which is only 4-5 months away). Thus, my personal guess is that company may do share buybacks in the next few months;

b) 4QFY18F is usually SP’s peak quarter in terms of results (pls refer to my earlier article HERE on SP for more info);

c) SP may step up its investor relation activities in January to engage the investment community, as funds and analysts return to work from holidays.


There are several risks, some of which I have highlighted in my earlier write-up HERE. To reiterate, some risks include unfavourable outcome from the shareholders’ (not the company) legal suit against American 2030; 4QFY18F missing analysts’ estimates by a large degree, illiquidity risk. Furthermore, the above chart reading is tricky, as SP is less liquid. Readers should exercise your due diligence.

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here

P.S: I have already informed my clients when SP is trading at $0.325 this morning. I am vested in SP.


Please refer to the disclaimerhere


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Sunpower slips into bear market territory – Buying opportunity or falling knife? (24 Oct 18)

This week, Sunpower attracts me due partly to the industry which it is in; the recent US$180m investments made by DCP and CDH into Sunpower whose market cap is only around US$206m, and the considerable 40% share price decline since hitting an intra-day high of $0.645 on 28 Jun 2018 to trade $0.385 today. Let’s take a look.

Description of Sunpower

Based on Sunpower’s description, it is an environmental protection solutions specialist in proprietary energy saving and clean power technologies. It has two main business segments, viz. Manufacturing & Services (“M&S”) and Green Investments (“GI”). M&S segment comprise of Environmental Equipment Manufacturing (“EEM”) and Engineering, Procurement and Construction Integrated Solutions (“EPC”). Notwithstanding the growth in M&S segment (Sunpower serves blue chip clients such as BASF, BP, Shell etc.), it plans to focus on its GI segment as it generates intrinsic value in the form of long-term, recurring and high-quality cash flows. Please refer to Chart 1 below and Sunpower’s company website HERE for more information.

Chart 1: Sunpower’s business segment

Source: Company

Investment merits

In an industry endorsed by China’s government policies

One of the most attractive aspects of Sunpower is the industry it is in. It is common knowledge that China places environmental protection as one of their utmost priorities. China’s 13th Five-Year Plan for National Eco-environmental Conservation and the enforcement of the Environmental Protection Tax are some examples that China is determined to reduce pollution in the long term. With reference to a July 2018 article by Reuters, China has established a new cross-ministerial leadership group (rather than just to leave solely to the Ministry of Ecology and Environment) to solve pollution in northern regions around Beijing. This also underscores the importance that China places on pollution. In view of these supportive policies, Sunpower seems to be in the right industry with sanguine prospects.

EEM and EPC segments illustrate Sunpower’s technology expertise

EEM segment comprise of design, R&D and manufacture of customised energy saving and environmental protection products with proprietary heat transfer technologies. Its products include heat exchangers and pressure vessels, and pipeline energy saving products. According to Sunpower’s annual report 2017, the heat-transfer rate of the Group’s heat pipes and heat pipe exchangers is 3,000 times faster than that of conventional products, and its heat exchangers are able to achieve energy savings of 30%-50%. This translates into significant cost reduction for customers. This may arguably be the reason why Sunpower has managed to secure a total of RMB150m from a single customer in U.S. and RMB 500m worth of contracts from GCL-Poly and other polysilicon companies.

For its EPC segment, one of the systems which Sunpower provides is the Flare and Flare Gas Recovery System. This is used to recover useful petrochemical by-products from flare or waste gas, reduce pollutant discharge into the atmosphere, lowering costs for customers. It is noteworthy that Sunpower is the only officially-appointed supplier of flare systems for Shell from Asia, and one of the three such suppliers for Shell in the world. It manages to secure a contract worth RMB107m with Zhejiang Petrochemical at the start of 2018. According to company, this is the largest flare gas recover system ever in China’s petrochemical industry which underscores Sunpower’s capability in managing EPC’s contracts.

Each business segment compliments one another

With Sunpower’s 20 years of track record in the EEM and EPC segments, it has progressed into its GI business with the ownership and operation of centralised steam, heat and electricity plants. These GI projects are built internally as Sunpower has the knowledge and capabilites to do so with its EEM and EPC business segments. Building in house allows Sunpower to have control over its costs and construction schedule, thereby increases its competitiveness against other players. Furthermore, its GI business naturally drives demand back to its EEM and EPC segments.

GI – interesting “circular economy” concept

Sunpower has brought recycling to the next level via this circular economy concept where the waste materials from one company or industry become the feedstock for another industry. For example, in Sunpower’s Changrun facility (see Chart 2 below), sludge and treated wastewater from a neighbouring water treatment plant are used as fuel and a clean water substitute to run its boilers. Sunpower also sells its own wastes such as ammonium nitrate and ash to fertiliser and building material factories. Overall, this reduces costs, provides an additional revenue source to Sunpower (by selling its waste products to another industry), and is in line with China’s environmental policies.

Chart 2: Changrun circular economy model

Source: Company

GI – clear pipeline of projects

Sunpower has laid out clearly to the investment community of its GI’s existing and planned projects. Such projects, if materialised and successfully executed, should bode well for the growth of their GI segment.

Table 1: GI’s project update and pipeline*

Source: Company

*The RMB765m investments in the final stage of M&A completion refers to Yongxing Thermal Power Plant has been completed and announced on 5 Sep 2018.

Sitting on record order books for its EEM & EPC segment

As of Jun 2018, Sunpower is sitting on a record order book of RMB2.0b even after delivering record 1HFY18 revenue. Although Sunpower has many repeat customers (in fact, 70% of their customers in EEM & EPC segments are repeat customers), Sunpower continues to expand into new areas and markets. The contract win amounting to a total RMB150m from a single customer in U.S. is a case in point.

Table 2: Record order book with 70% of customers being repeat customers

Source: Company

Strategic PE investors’ two consecutive rounds of investments lend vote of confidence

For Sunpower to build up its GI investments, it requires funding. Both DCP and CDH are private equity funds which have extensive experience in investing in China companies and have invested an aggregate US$180m into Sunpower. Some points worthy to highlight

  1. DCP is founded by Mr. David Liu who was a Partner of KKR, Cohead of KKR Asia Private Equity and CEO of KKR Greater China. He has more than 25 years of experience and was responsible for a number of successful investments such as Ping An Insurance, Qingdao Haier Co, Belle International, etc. Mr. Liu currently serves as a non-executive director on the Board. One of the companies which KKR invested (when Mr Liu was at KKR) is in United Envirotech (currently known as Citic Envirotech). KKR started investing in United Envirotech in 2011 through the subscription of US$114m in convertible bonds. In 2013, it invested a further $40m in the form of equity investment into United Envirotech. In Nov 2014, KKR and Citic launched a joint takeover for United Envirotech;

  1. Established in 2002, CDH is one of the leading private equity companies that focuses on growth capital and middle market buyout investments in Greater China. It manages five USD-denominated funds and two RMB-denominated funds, with cumulative assets under management in excess of USD 10.5b. Mr Li Lei is the Managing Director of CDH Investments Management (Hong Kong) Limited since January 2016 and he currently serves as a non-executive director on the Board. Website:

  1. The above funds are extremely experienced in investing in Chinese companies. Both funds have invested an aggregate US$180m into Sunpower whose market cap is only US$206m (based on 24 Oct 2018 last traded price $0.385). It stands to reason that both funds would have done considerable due diligence before deciding to invest such a significant amount into Sunpower. This vote of confidence is assuring (at least) to me.

2HFY18 should be stronger than 1HFY18

According to company, 2HFY18 should be stronger than 1HFY18 due mainly to the following reasons:

a) Completion of Yongxin acquisition on 5 Sep 2018 which is expected to contribute immediately to top and bottom line;

b) 1st half is usually a seasonal slower period due partially to Chinese New Year. According to a Lim&Tan report, they estimate that 1st half typically comprise 30-40% of its entire full year results;

c) Ramp up of GI projects through new pipeline connections and new customers. Firstly, its GI investments can gain traction due to China’s mandatory closure of small “dirty” boilers in existing industrial parks and relocation of new factories into parks served by GI’s centralised boilers. Secondly, Changrun has successfully connected to the grid last month and electricity revenue will be another source of income from Sep 2018 onwards. Thirdly, Xinyuan should do better in terms of heating revenue as it is envisaged that more heat will be supplied in 2HFY18 where weather becomes colder in China.

Chart analysis

Sunpower has dropped 40% from an intra-day high of $0.645 on 28 Jun 2018 to trade $0.385 on 24 Oct 2018. The decline in the past three days has been accompanied with above average volume. Based on Chart 3 below, Sunpower has been on a long term uptrend since 2016 but has breached this uptrend line yesterday. Amid the sharp fall in the past three days, ADX has risen from a low level from 12.8 on 22 Oct 2018 to trade 19.2 with negatively placed directional indicators. Indicators are oversold. For example, MFI is around 5 (lowest level it can reach is 0) and RSI last trades 19.2. Since 2005, there were only five occassions where RSI is lower than now with the lowest RSI at 16.6. Although the stock price is near a two year low, OBV is still at a rather elevated level.

On balance, chart looks bearish for Sunpower especially after it breached the uptrend line with volume expansion. However, oversold pressures have built with the 27% decline in the past three days. Nevertheless, it is noteworthy that Sunpower’s illiquidity makes chart reading tricky.

Near term supports: $0.375 – 0.380 / 0.360 / 0.350

Near term resistances: $0.440 / 0.460 / 0.480 / 0.495 – 0.510

Chart 3: Sunpower has slumped 40% since hitting a year to date high of $0.645

Source: InvestingNote 24 Oct 18


Analysts’ aggressive estimates for FY18F

Based on Table 3 below, analysts are projecting Sunpower to post strong 2HFY18F results of EBITDA and net profit of around RMB261m and RMB176m respectively. It is noteworthy that Sunpower posted 1HFY18 EBITDA and net profit of around RMB145m and RMB73m respectively. Thus, based on visual comparison, it seems to be challenging. Nevertheless, analysts are positive due to the aforementioned reasons (see above “2HFY18 should be stronger than 1HFY18”) Lim & Tan and UOB ascribe target prices $0.95 and $0.76 respectively.

Table 3: Analysts’ estimates for Sunpower’s FY18F results

Source: Ernest’s compilations

Convertible bonds cloud the net profit picture

If readers refer to Sunpower’s 1HFY18 net profit attributable to shareholders, you may get a shock to see that it only registered RMB1.4m net profit. This “low profit” is due to the effects of the convertible bonds which it issued to DCP and CDH. To reflect its true operating performance, company has put in another line called “underlying net profit” in their 1HFY18 results press release. 1HFY18 underlying net profit jumped 25% to RMB72.5m vis-a-vis 1HFY17.

Execution & project management are key

Based on Table 1 above, Sunpower has invested and committed RMB1.3b equity into GI projects. If everything goes according to plan, it may invest and commit another RMB1.2b into new projects. As of now, Sunpower has six GI plants (including Yongxin). Thus, it may still be too early to assess whether Sunpower can effectively execute its strategy of acquiring and operating the GI plants effectively and according to project schedule.

Higher raw material prices affected 1HFY18 gross margins

Sunpower’s gross margins declined from 23.8% in 1HFY17 to 20.1% in 1HFY18 due to a rise in raw material prices. Company has carried out cost control initiatives which should help to combat the rise in raw material prices to some extent.

Leverage to rise with more GI plants

It is noteworthy that Sunpower plans to finance the GI plants with 60% debt and 40% equity. Thus, its debt is likely to increase over time. Nevertheless, this may be “good debt” as a) according to company, the internal rate of return for such projects is around 15% per annum, thus it seems financially sound to finance partially via debt; b) the cashflows generated by GI are long term, high quality, recurring in nature and subject to less volatility which should be able to easily pay off interest expenses etc (barring unforeseen business failure of one or a number of major user factories)

Lack of liquidity

Although Sunpower’s liquidity has improved this year vis-à-vis last year, its average 30D volume is still around 185K shares per day. This is not a liquid company where investors with meaningful positions can enter or exit quickly.

No direct access to management

I have no direct access to management and am not extremely familiar with the company. This is my first write-up on the company and I am still trying to understand more about the company. Readers who wish to know more about Sunpower can refer to the company website HERE and analyst reports HERE for more information.

Recent selling is accompanied with volume

Recent selling has been fierce and accompanied with above average volume. It is possible that there may be some news known to the market but unknown to me on Sunpower which may explain why the share price dropped so much in the past three days.

Volatile due in part to its illiquidity

As Sunpower is pretty illiquid, it can be quite volatile at times. Average daily range can easily be $0.020 (without any particular news), translating to 5% of share price movement. Thus, it may not be suitable to most people.


Notwithstanding the sharp sell off in the share price, I like the industry which Sunpower is in. Furthermore, their GI investments and the entry of the CDH and DCP seem to bolster confidence. Importantly, readers should do their own due diligence (especially taking into account of the recent fierce sell off without any news) as this is just my introductory write-up in Sunpower. I am still learning about the company.

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here

P.S: I am vested in Sunpower. Do note that as I am a full time remisier, I can change my trading plan fast to capitalize on the markets’ movements.


Please refer to the disclaimerHERE


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