KUALA LUMPUR (Dec 13): ITMAX System Bhd, which gained 28.97% on its maiden trading day, plans to increase video surveillance facilities (artificial intelligence cameras) in Kuala Lumpur to 50,000 over the next 10 years as part of its expansion plans.

The home-grown smart city integrated system and solution provider’s expansion plans include providing video surveillance facilities to Dewan Bandaraya Kuala Lumpur (DBKL) and the Royal Malaysian Police (PDRM) lockup facilities, leasing of telecommunication towers and monopoles, and supply and installation of networked systems.

“We target [to expand the video surveillance] to all major cities in Malaysia. If you compare to our neighbour like Singapore, Singapore has around 100,000 cameras, whereas in Malaysia, Kuala Lumpur has the largest number of cameras while other cities have less than 100.

“Now we have 5,000 cameras in KL, compared to around 1,000 cameras in 2018. But to cover blind spots we need 50,000 cameras in the city. It will take some time, 10 years is achievable,” ITMAX’s managing director/chief executive officer William Tan Wei Lun told reporters at a press conference after the company’s listing on Bursa Malaysia’s Main Market on Tuesday (Dec 13).

ITMAX is principally involved in the business of supply and installation and provision of public space networked systems and investment holdings. Its sole subsidiary Sena Traffic Systems Sdn Bhd is mainly involved in research and development (R&D) of systems and application software, design and assembly of controllers, supply and installation of networked traffic management systems and providing leased and managed services of video surveillance and analytics systems.

ITMAX opened at RM1.52 on Tuesday, before surging to an intraday high of RM1.55 in the afternoon trading session — a 44.86% premium to its initial public offering (IPO) price of RM1.07.  

The stock then reduced its gain to close at RM1.38 — up 28.97% or 31 sen — giving it a market capitalisation of RM1.42 billion. Trading volume swelled to 130.77 million, more than seven times than the 18.53 million in the first trading hour.  

ITMAX, which saw its IPO oversubscribed by 18.2 times, is the fifth company to be listed on Bursa’s Main Market this year.  

In comparison, other Main Market-listed companies Senheng New Retail Sdn Bhd tumbled 20.09% on its maiden trading day versus its IPO price of RM1.07, Farm Fresh Bhd gained 27.41% from RM1.35, Seng Fong Holdings Bhd was down 10% from 75 sen, and AME Real Estate Investment Trust was up 2.65% from RM1.13.  

ITMAX has secured 19 contracts and has a current orderbook of about RM600 million, which provides earnings visibility until the financial year 2029 (FY2029).

About 70% of the company's total order book (RM420 million) came from its major single customer DBKL, Tan said.

“We will also get contracts from Home Affairs Ministry and other local councils. The revenue [from these contracts] will be recognised later for our next financial years,” he said, adding that the contracts will be announced in due course.

On its financial performance, ITMAX’s earnings have been on an upward trend over the past three years. Its profit after tax climbed to RM29.2 million in FY2021, compared with RM12.7 million in FY2020 and RM1.6 million in FY2019. Revenue grew to RM79.8 million in FY2021 from RM47.5 million in FY2020 and RM37.2 million in FY2019.

ITMAX has raised RM203.89 million through the public issue of 190.55 million new shares. Out of the total proceeds raised, ITMAX has allocated RM85 million for the expansion of its smart city application.

Meanwhile, RM12.5 million has been budgeted for the expansion of its R&D capabilities, while RM20 million has been set aside to expand its enterprise market.

Another RM39.5 million has been allocated for network and telecommunication infrastructure expansion, RM29.08 million for working capital while RM8 million will be for the repayment of borrowings.

Maybank Investment Bank Bhd is the principal adviser, joint bookrunner, managing underwriter and joint underwriter for the IPO. CIMB Investment Bank Bhd is the joint bookrunner and joint underwriter whereas AmInvestment Bank Bhd is the joint underwriter for the IPO.

Hong Leong Investment Bank (HLIB) Research, Rakuten Trade Sdn Bhd, Mercury Securities Bhd and Apex Securities Bhd have initiated their coverage of ITMAX with "buy" recommendations and target prices (TPs) of between RM1.30 and RM1.70.

HLIB pegged the stock’s TP at RM1.70, saying ITMAX's revenue will grow at a compound annual growth rate (CAGR) of 29% over the FY2021-FY2024 period, yielding an impressive 32% CAGR in earnings, mainly supported by more installed video cameras, more networked streetlights and more traffic management systems.

“Post IPO, we also project that it will have a strong balance sheet with a net cash position of RM146 million (or 14 sen per share) which will comfortably fund its expansion plans,” it said in a note.

Rakuten Trade Sdn Bhd, meanwhile, expects the company to pay a dividend of 1.3 sen for FY2023 and 1.5 sen for FY2024. It started coverage of the stock with a TP of RM1.63.

“Based on our estimates, ITMAX will pay [dividends] of 1.3 sen and 1.5 sen for FY2023 and FY2024 translating into yields of 1.2% and 1.4% respectively,” Rakuten noted.  

Mercury Securities Research, which issued a "subscribe" recommendation with a TP of RM1.64, likes the stock for its attractive expansion plans and growth prospects.

Apex Securities Bhd derived a TP of RM1.30 for the stock, based on Bursa’s Technology Index price-to-earnings ratio of 25.4 times and earnings per share of 5.1 sen for FY2023.