ITMAX has secured a VO of RM47m from DBKL to replace LED street lights. This VO will cover the replacement of circa one third of the total street lights in KL and it is likely to win the balance with potential contract value of RM71-84m. Order book is at an all-time high of RM917m. It is at the final negotiation stage with another Johor council and contract size is potentially much larger than initially expected. Reiterate BUY with higher TP of RM2.91, pegged to 35x of FY25f EPS.
HLIB opines that ITMAX deserves a premium valuation as it has unique direct exposure to AI theme, especially at the application level.
The house views this as the first win in 2024 and sees this positively and remain upbeat on its prospects. This VO will cover the replacement of ~18k street lights which is about one third of the total in KL (~45k-50k) and we believe that it is likely to win the remaining with potential contract value of RM71-84m. This VO is expected to be completed within 1-2 years.
All-time high order book. With this addition, it has a total unbilled order book of RM917m which will be recognised progressively up to May 2039. As end of 3Q23,
ITMAX’s tender book stood at circa RM600m. More to come from Johor. To recap, ITMAX has secured three contracts from three key city councils in Johor, namely from MBJB, MBIP and MBPG with a total contract value of RM296.2m for a period of 15 years. Installation works are currently ongoing for all three councils while simultaneously, the group is working to expand its involvement to provide a more comprehensive and integrated smart city ecosystem. Note that these are only 3 out of 16 councils in Johor and we expect all to come on board over time to realize the integrated smart city system. Furthermore, these deals only comprise of video surveillance services and smart traffic light system – HLIB said it does not discount that other solutions such as networked lighting and smart parking to be included in the future. The house understands that it is at the final negotiation stage with another council and contract size is potentially similar to the former three, which much larger than what expected.
To date it has developed 27 AI features and is currently in the process of developing another 15 additional features for existing products offerings. In addition, ITMAX is also working on new developments to enhance its traffic light management
system, including (i) the arterial traffic management to use generative AI to forecast optimal timing plans and pathways for road vehicles to streamline major city roadways to minimize travel time; and (ii) recommender system to enhance traffic flow and congestion management, facilitating emergency response with dynamic route planning.
HLIB retains its ‘unchanged’ forecast for the stock, however it reiterates a buy call with a higher TP of RM2.91 (from RM2.08) as the house raises the PE multiple from 25x to 35x of FY25f EPS. The house opines that ITMAX deserves a premium valuation as it has unique direct exposure to AI theme, especially at the application level. It believes 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.
