HLIB Research said the MPS award could lift ITMAX’s bottom line by RM1.8mil a year.
PETALING JAYA: The latest contract awarded to smart parking solutions provider ITMax System Bhd
by the Segamat Municipal Council or MPS to operate 7,637 street parking spaces over 15 years is expected to boost the company’s earnings, while also providing momentum for more such contract awards in Johor.
Hong Leong Investment Bank (HLIB) Research said in a report that the MPS award could lift ITMAX’s bottom line by RM1.8mil a year after taking into consideration revenue of RM3.7mil a year, based on a 70:30 sharing ratio from a back-of-the-envelope calculation.
It added that the MPS award “is only the first phase and there are 2,000 to 3,000 more parking spaces to be gazetted”.
Coming after three other similar awards in recent months, the research house said the latest award strengthens its belief that this would propel ITMAX’s earnings “to the next level” while the revenue generated would provide additional recurring income for the company.
It said there were significant opportunities for the company to expand its smart parking solutions services to the other 12 councils in Johor.
It pointed out that assuming a total of 200,000 parking bays in the greater Johor area and a 40% utilisation rate on a six-day parking operations duration at four hours a day with parking tickets priced at 60 sen an hour, this would provide an average of RM11.5mil monthly or RM138.2mil a year.
Assuming a 70:30 revenue ratio and 50% margin, the company’s bottom line could rise by RM48mil a year.
HLIB Research has maintained a “buy” call with an unchanged forecast and target price of RM4.71 per share. The target price is pegged to 45 times the price earnings multiple of the financial year ending Dec 31, 2026 earnings per share.
“We opine that ITMAX deserves a premium valuation as it has unique direct exposure to the artificial intelligence theme, especially at the application level.
“We believe that this home-grown smart city integrated system and solution provider is a compelling case, given its multi-year growth potential on the back of solid order and tender books,” it added.
For its second quarter ended June 30, 2024, ITMAX’s net profit rose to RM19.16mil from RM15.12mil in the previous corresponding period, while revenue grew to RM53.25mil from RM33.35mil a year earlier.
In its notes on its results performance, ITMAX said it is looking to continue its growth by expanding its service offerings and expanding into other geographical territories and segments.
“While the group continues to deliver on its ongoing project and plots its mid and long-term growth, inflationary pressure amid volatile energy prices and disrupted supply chains remain as threats to the local and global economy.
“Nevertheless, the board of directors is cautiously optimistic that the group’s future prospects remain favourable.”
In a report on the company’s earnings performance, Maybank Investment Bank Research said the results were within expectations.
ITMAX’s results were satisfactory, with earnings momentum expected to pick up in the second half as more CCTV units are added to its network in Johor. “Our earnings forecasts are unchanged. ITMAX remains our top software pick for its growth.”
