Financial Highlights

The following table sets out a summary of the combined financial information of the Group for the Financial Years Under Review and FPE 30 June 2022:

• The revenue increased from RM 37 mil (FYE 2019) to RM 79 mil (FYE 2021) which shows the company is expanding the market very aggressively.
• The gross profit margin grew from 18.4% (FYE 2019) to 66.9% (FYE 2021), the improvements in the GP were mainly contributed by the provision of public space networked systems. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin increased from 4.2% (FYE 2019) to 36.7% (FYE 2021).
• The gearing ratio is 1.4 times on FYE 2021, it considers a dangerous range because it is over the benchmark range which is 0.25 - 0.5 times. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for the Financial Years Under Review are as follows:

According to the details, the top 5 customers are around 90%. The company is dependent on DBKL as revenue from their contracts with Datuk Bandar Kuala Lumpur for the provision of works and service to DBKL accounted for RM 58 mil (73.2%) for FYE 21. The company is facing high customer concentration risk, which means that if the DBKL terminates the contract with the company, it will face a serious impact on its financial result.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are around 65.2%. The company mentioned they are not dependent on any of these major suppliers as these materials and services can be sourced from other suppliers or subcontractors. While they are generally dependent on subcontractors to carry out certain works, they are not dependent on any single subcontractor.

Industry Overview

ITMAX System Berhad and its subsidiary, (ITMAX Group) are primarily involved in public space networked systems focusing on lighting, traffic management and video surveillance, as well as communications network services, which may be part of a smart city’s infrastructure. Public space mainly refers to the space that is generally accessible to the public such as roads and parks and is mostly under the jurisdiction of federal, state, federal territory or local governments (also referred to as local authorities). ITMAX Group is involved in some of Kuala Lumpur’s smart city initiatives. As such, this report will focus on public space networked systems as well as smart cities

According to Vital Factor Consulting’s research, one of the factors for the implementation of public space networked systems includes the emergence of smart cities in the national development agenda that affects the urban development policy and planning at the state and local levels. In Malaysia, several states such as Selangor, Penang, Sarawak and Malacca have introduced their own local smart city blueprints after the launch of the MSCF in 2019. In 2021, the contribution of the digital economy to Malaysia’s economy grew by 12.1%, representing 23.2% of the total GDP of Malaysia.

The development of smart cities anchors on primary and basic infrastructures, as well as connected and modern digital infrastructures. The performance of the public space networked systems industry is dependent upon the general well-being of the economy, the performance of the construction of infrastructures, as well as government allocation of the expenses relating to infrastructures at federal and state levels

In 2021, the real GDP of Malaysia’s economy recovered and grew by 3.1% despite the reimposition of containment measures. In H1 2022, Malaysia’s real GDP grew by 6.9% compared to H1 2021, underpinned by favorable momentum in the domestic economy, steady expansion in external sector activities and continued improvement in the labour market conditions. Overall, in 2022, the real GDP of Malaysia’s economy is expected to grow between 6.5% and 7.0% and is forecasted to grow between 4.0% and 5.0% in 2023 (Source: MOF)

The performance of the construction of infrastructures would impact the progress of installing public space networked systems. Moving forward, the development of digital infrastructures will be supported by MyDIGITAL’s initiatives to expand the fibre networks that provide high-speed and reliable broadband services, thereby enhancing electronic communications and applications that are crucial for transmitting data. This includes a digitally-enabled government and some of the

targets are 80% end-to-end online government services, and 80% usage of cloud storage across government and all ministries and agencies to provide cashless payment options in 2022. Additionally, under Budget 2022, the 5G services will be expanded to 36% of high-density areas including in major cities in Johor, Selangor, Penang, Sabah and Sarawak.

The establishment and implementation of networked systems in public spaces involve substantial investments and resources from local governments, which are largely based on the government allocation of the expenses relating to infrastructures at the federal and state levels. As Malaysia enters the second year of the 12th Malaysian Plan, development expenditure for 2022 will continue to be distributed to projects with high impact to promote economic growth, create a conducive investment climate and safeguard the well-being of the people. The focus of the Budget 2022 remains to be on projects related to transport, trade and industry, as well as energy and public utility subsectors.

Source: VITAL FACTOR CONSULTING

Business strategies and prospects for ITMAX SYSTEM BERHAD

The business strategies and plans are set out below:

1. The company envisages providing public space networked systems outside of the central region of Peninsular Malaysia.
2. The company envisages setting up a data lake facility in Klang Valley which is a central storage repository that holds data in a secured and managed manner.
3. The company plans to leverage the core competencies in networked systems to address opportunities in townships, malls, office towers, hospitals and healthcare facilities covering public and private spaces to grow the business.
4. The company intends to expand the R&D team by recruiting 23 personnel who will focus on developing systems and software applications for the networked system platform.

MQ Trader View

Opportunities

1. Strong financial results. The company revenue and gross profit margin keep growing, which shows that the management can operate the company very well.
2. The company has contracts to sustain in the near-mid term. The order book is contract based and the remaining portion of the order book will be recognized progressively up to the FYE 31 December 2029 based on the unbilled amount of contracts secured as at the LPD. Of the total unbilled amount of RM598.2 million, the company expects to bill and recognize revenue of approximately RM27.2 million from the LPD to December 2022, RM131.9 million for the FYE 31 December 2023, RM136.5 million for the FYE 31 December 2024, RM107.1 million for the FYE 31 December 2025 and RM195.6 million between the FYEs 31 December 2026 and 31 December 2029.

Risk

1. The company is exposed to interest rate fluctuations. All the borrowings are interest-bearing obligations. Any hike in interest rates would affect the financial performance. The finance comprises interest charges on banking facilities, mainly term loans and revolving credit that are granted by banks and financial institutions.
2. High customer concentration risk. The company’s revenue is substantially derived from the works and services provided to DBKL in connection with contracts with Datuk Bandar Kuala Lumpur. The loss of DBKL as the customer may adversely affect its business, results of operations and financial condition. There can be no assurance that DBKL will continue to extend the contracts or enter into new contracts with the company upon their expiry in the future. Should this occur, the company will need to source for new contracts with the other existing customers and/or new customers to substitute the loss of revenue from DBKL promptly.

Community Feedback

We encourage traders to try out and evaluate the MQ Trader system and provide us feedback on the features you like to see in the system. We have received many positive feedbacks so far, and we are currently compiling and reviewing them for possible inclusion into the next release of the system.

We would like to develop this system based on community feedback to cater for community needs. Thanks to all those who have provided valuable feedback to us. Keep those feedback coming in!

Disclaimer

This article does not represent a BUY or SELL recommendation on the stock covered. Traders and Investors are encouraged to do their own analysis on stocks instead of blindly following any Trading calls raised by various parties in the Internet. We may or may not hold position in the stock covered, or initiate new position in the stock within the next 7 days.

Join us now!

MQ Trader stock analysis system uses Artificial Intelligence (AI), various technical indicators and quantitative data to generate accurate trading signals without the interference of human's emotions and bias against any particular stock. It comprises trading strategies which are very popular among fund managers for analysing stocks.

MQ Trader stock analysis system is SPONSORED for MQ Trader members. To use this amazing tool, you can sign up via MQ Trader Sign Up!

Contact us

Please do not hesitate to contact us if you have any enquiry:

Facebook: https://www.facebook.com/mqtrader

Instagram:https://www.instagram.com/mqtrader

i3messanger: https://messenger.i3investor.com/m/chatmq

YouTube: https://www.youtube.com/channel/UCq-26SGjlQTVQfO7DoEihlg

Email: admin@mqtrader.com