Date of Report: 09 October 2024
Broker: UOB Kay Hian
Company Overview
ITMAX Systems is a provider of public space network systems, focusing on key areas such as lighting, video surveillance, traffic management, and communications network services. The group is an active participant in Kuala Lumpur’s smart city initiatives.
- Bloomberg ticker: ITMAX MK
- Sector: Information Technology
- Market Capitalization: RM 3,715.8 million (US$ 866.1 million)
- Shares Issued: 1,029.3 million
- 52-Week High/Low: RM 1.71 / RM 3.67
- Major Shareholders:
- SENA HLD SDN: 53.20%
- GENDA SENSASI SDN: 4.58%
- AIA BHD: 3.26%
Key Financials
- FY2024 Net Asset Value/Share: RM 0.33
- FY2024 Net Cash/Share: RM 0.14
- Dividend Yield (2024F): 0.4%
- EPS Growth (2024F): 6.1 sen
- P/E Ratio: 59.2x
- Net Profit Margin: 42.2%
- Orderbook as of March 2024: RM 1.511 billion
Recent Developments
Smart Parking Contracts in Johor
ITMAX recently secured three smart parking contracts in Johor, expanding its portfolio to a total of 57,389 parking spaces. These contracts include:
- 8,640 spaces in Muar
- 7,637 spaces in Segamat
- 5,113 spaces in Tangkak
The company estimates a potential of 200,000-300,000 parking spaces in Johor, and assuming a 40% utilization rate, ITMAX could generate up to RM85.18 million in revenue from this segment.
Major CCTV Contracts in Kuala Lumpur
ITMAX secured a contract from Dewan Bandaraya Kuala Lumpur (DBKL) for the installation of 5,000 CCTVs across Wilayah Persekutuan Kuala Lumpur. This contract doubles the current CCTV count in KL to 10,000. ITMAX aims to increase the number of CCTVs to at least 50,000 by 2028, in line with targets set by the government.
Expansion to Penang
ITMAX has entered the Penang market with a contract for video surveillance services. This includes the installation of 48 CCTVs valued at RM 3.2 million over a six-year period. ITMAX anticipates high demand for CCTVs in Penang, estimating that the region could require 10,000 units.
Growth Potential in Johor and Penang
ITMAX has signed contracts with four out of 16 councils in Johor. The company currently operates 1,700 CCTVs and 60 junctions of traffic management systems in the state. The substantial room for growth in Johor and the new ventures into Penang are key drivers for future revenue.
Financial Performance
- Revenue Growth: ITMAX’s revenue is forecasted to increase from RM149.7 million in 2023 to RM210.2 million by 2025.
- EBITDA: Expected to grow from RM94.0 million in 2023 to RM161.0 million by 2026.
- Net Profit: Expected to rise from RM63.3 million in 2023 to RM121.1 million by 2026.
Strategic Initiatives
State-Wide Penetration into Johor Market
In September 2023, ITMAX’s subsidiary Southmax Sdn Bhd secured a 15-year RM105.3 million subscription services contract with the Johor Bahru City Council. This marked the company’s entry into the Johor market outside Kuala Lumpur. Subsequently, ITMAX secured contracts with the Iskandar Puteri, Pasir Gudang, and Kulai city councils, growing the total orderbook in Johor to RM373.2 million.
MOU with Jland Group
In April 2024, ITMAX signed a memorandum of understanding (MOU) with Jland Group, the real estate arm of Johor Corp. The partnership focuses on deploying smart city systems across Jland’s real estate developments, which include over 34 industrial parks. This is expected to enhance ITMAX’s presence in smart townships by integrating CCTVs, LED street lighting, parking management, and telco solutions.
ESG (Environmental, Social, Governance) Initiatives
Environmental:
- Replacing halogen streetlights with more energy-efficient LED alternatives in Kuala Lumpur.
Social:
- The company maintains a 50% male-female employee composition.
- There were zero work-related fatalities in 2023.
Governance:
- ITMAX reported zero cases of bribery, corruption, or disciplinary actions in 2023.
- No complaints concerning breaches of customer privacy or data losses were reported.
- 90% of the company’s spending in 2023 was on local suppliers.
Future Outlook
ITMAX continues to build a solid orderbook, leveraging AI technologies and unique database systems for competitive advantage. The company sees multi-year growth potential across Kuala Lumpur, Johor, and Penang, driven by smart city solutions, AI-enhanced services, and expansion into new regions. The stock is recommended as a BUY with a target price of RM4.10, reflecting a projected upside of 13.5%.
