ITMAX System Bhd (ITMAX) will be making its debut on Bursa Main Market today. The company is principally involved in the supply and installation and provision of public space networked systems. The company’s public space networked systems are in line with the Malaysian Government’s Smart City Initiatives such as Smart Living, Smart Environment, Smart Mobility, Smart Digital Infrastructure and Smart Government. Currently, the company has unbilled orders of RM598.2m, providing earnings visibility over the next 2-3 years. We expect ITMAX to register net earnings of RM43.7m and RM64.5m for FY22 and FY23 respectively. BUY with a TP of RM1.63 based on 26x PER (average PER of its regional peers at similar capacity and market cap) over FY23 EPS.

ITMAX’s wholly-owned subsidiary, Sena Traffic Systems SB (STS) is involved in the R&D on systems and application software, design and assembly of controllers, supply and installation of networked traffic management system, and providing leased and managed services of video surveillance and analytics systems.

To date, ITMAX has installed about 45,000 LED streetlights equipped with sensors which are linked through communication networks connected to DBKL’s control centre. In addition, the company has a group of networked video surveillance facilities such as 8,000 video cameras and related infrastructure such as poles and power cables; 400km of fibre optic communications network in Kuala Lumpur; and control centre facilities including the command centre software platform. ITMAX has also deployed 390 traffic controllers in Peninsular Malaysia namely Kuala Lumpur, Seremban and Johor.

ITMAX offers networked video surveillance facilities which form part of its integrated management system incorporated with artificial intelligence (AI) and machine learning. This system has the ability to detect illegal parking, traffic congestion, early flood warning, vehicle breakdown or stop on road or roadblock and many more.

To expand its business, ITMAX plans to leverage its core competencies in networked systems to explore opportunities in townships, malls, office towers, hospitals and healthcare facilities covering public and private spaces. ITMAX also plans to extend its expertise to highways mainly for its networked street lighting and video surveillance systems.

As at 3QFY22, ITMAX has a net gearing of close to 1x. Proceeds from IPO will be used to repay part of its borrowings and mainly for business expansion. Post IPO, we reckon ITMAX’s net gearing to fall to about 0.5x. ITMAX has a dividend policy of 20% payout ratio from its net profit. Based on our estimates, ITMAX will pay dividend of 1.3sen and 1.5sen for FY23 and FY24 translating into yields of 1.2% and 1.4% respectively.

Source: Rakuten Research - 13 Dec 2022