PETALING JAYA: ITMax System Bhd
could see further growth opportunities for closed-circuit TVs (CCTVs) installation contracts from Johor and Penang, which are seen as significantly underpenetrated markets compared with Kuala Lumpur.
According to UOB Kay Hian Research (UOBKH Research), ITMAX recently bagged a total of RM373.2mil worth of contracts to provide video surveillance services in Johor.
“We understand that ITMAX ’s smart-city solutions is a state-wide adoption and there are a total of 16 local councils within Johor, leaving plenty of growth opportunities for the group to capture,” the research house said.
In September last year, ITMAX’s 65%-owned subsidiary Southmax secured a 15-year RM105.3mil subscription-services contract from the Johor Baru City Council.
This marked the group’s initial foray into a new geographical market outside of Kuala Lumpur to provide video surveillance systems and services.
Subsequently, ITMAX secured three contracts from the Iskandar Puteri, Pasir Gudang and Kulai city councils.
Beyond Johor, the company has ventured into Penang with a video surveillance services contract for 48 CCTVs, valued at RM3.2mil over six years.
“Management anticipates that both Penang and Johor will each require at least 10,000 CCTVs, underscoring significant future opportunities for ITMAX in these regions,” UOBKH Research said.
Meanwhile, ITMAX’s latest win came from Kuala Lumpur City Hall (DBKL) for the installation of an additional 5,000 CCTV units, amounting to RM539.5mil.
This brings the total number of CCTVs in Kuala Lumpur to 10,000, aligning with the government’s target of 20,000 CCTVs.
The RM539.5mil contract spans 120 months, including a 12-month installation period and a 108-month subscription period.
“With approximately RM60mil annually in revenue generated under the new contract, the payback period is reduced to just 1.5 years, significantly shorter than the previous payback period of two to three years.
“Additionally, ITMAX is currently ready to offer 10 additional artificial intelligence (AI) features on top of the existing 20 for its systems.
“If this materialises, ITMAX could charge a higher subscription rate to DBKL, further enhancing its high margins,” UOBKH Research said.
It noted that the company will only be able to recognise the revenue after the 12-month installation phase is completed.
As a result, its unbilled order book will increase by 53%, from RM1.02bil (as of 31 March 2024) to RM1.56bil.
UOBKH Research said that it believes ITMAX’s smart-parking system will be another strong growth driver for the company.
ITMAX’s 65%-owned subsidiary Southmax was also appointed as the sole smart-parking operator in the Iskandar Puteri area to manage over 32,025 parking spaces over a 15-year term.
The research house, which maintained a “buy” call but with a higher target price of RM4.10 on the company, has upgraded its 2025 to 2026 earnings by between 8% and 11%.
Similarly, Maybank Investment Bank Research was positively surprised with the timing of DBKL’s contract award as this will spur ITMAX’s long-term earnings growth.
The research house maintained its “buy” call on the stock with a higher target price of RM4.25.
Among the key catalysts are continuous variation orders on its video surveillance contract with DBKL to add more cameras and AI features, as well as adoption of similar video surveillance solutions by other states and municipalities in other parts of Malaysia.
However, the research house cautioned that there is downside risk from loss of existing contracts with DBKL to another competitor, while higher-than-expected costs related to its expansionary initiatives could be a drag on the company.
