HLIB positive with ITMAX’s RM47mil contract win

KUALA LUMPUR: Hong Leong Investment Bank Research (HLIB Research) is positive on ITMax System Bhd’s RM47.2mil street lights replacement.

ITMAX gained four sen, or 1.97% to RM2.07 with 584,800 shares traded at 10.36 am.

The company has recently secured a variation order (VO) from Kuala Lumpur City Hall (DBKL) for the replacement of LED street lights in Kuala Lumpur, for RM47.20mil.

“We view this news positively and remain upbeat on its prospects. This VO will cover the replacement of about 18,000 street lights which is about one third of the total in KL (about 45,000 – 50,000) and we believe that it is likely to win the remaining with potential contract value of RM71-RM84mil. This VO is expected to be completed within 1-2 years,” HLIB said.

The research house noted that its order book is at an all time. It has a total unbilled order book of RM917mil which will be recognised progressively up to May 2039. As end of 3Q23, ITMAX’s tender book stood at circa RM600mil.

HLIB Research noted that ITMAX has secured three contracts from major city councils in Johor, specifically the Johor Bahru City Council, Iskandar Puteri City Council and Pasir Gudang City Council. The total value of these contracts amounts to RM296.2mil, spanning a 15-year duration.

“We understand that it is at the final negotiation stage with another council and contract size is potentially similar to the former three, which is much larger than what we expect,” it said.

HLIB Research has reiterated a “buy” call on ITMAX with a higher target price of RM2.91 from RM2.08 previously as it raised price-to-earnings ratio to 35 times from 25 times previously.

“We opine that ITMAX deserves a premium valuation as it has unique direct exposure to AI 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 said.