ITMAX saw new highs but signs point to more bullish movements

It was a good day for those who bought ITMAX System Bhd shares prior to the announcement of it securing a new contract to operate smart parking in Johor. ITMAX rose as much as 2.1% or five sen to RM2.47 on June 5. The counter had already appreciated 6.1% the day before.

The stock was trading at RM2.43 at 9.30am, valuing the company at RM2.5 billion on Bursa Malaysia, after 874,800 shares changed hands. There was some profit taking, leaving it to close lower from its intraday high at RM2.42. It has performed quite well over the past year, up 74.82%.

Despite reaching a new high, the good run might still have legs. The rising momentum is likely to push the stock higher and test the next level of resistance of RM2.55 followed by RM2.80. Analysts 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.

The first contract for the provision of a smart parking system could signal more jobs in this area and boost its earnings. Itmax bagged the contract with Iskandar Puteri City Council to be a smart parking operator for 32,025 street parking bays for a period of 15 years commencing June 1, 2024. No contract sum was mentioned but a back-of-the-envelope calculation projects a total revenue collection of RM1.8 milion per month or RM21 million per year from the operations.

Based on revenue sharing of 70% for Itmax and 30% for the city council, this would translate to RM14.7 miliion revenue for Itmax per year. Itmax's bottom line would imply a RM7.5 million - RM8 million per year. Surely, this is not the first and last contract for ITMAX. There will be a bigger opportunity for the group to expand its smart parking services to the other 15 councils in Johor.

According to HLIB Research, assuming a total of 200,000 parking bays in the greater Johor area, with six days parking operations at four hours per day (40% utilisation rate) and 60 sen per hour, this would garner average RM11.5 million monthly or RM138.2 million per year.

The company has done relatively well in terms of fundamentals.

In the first quarter ended Mar 31, 2024, ITMAX posted a higher net profit of RM18 million compared with RM15.2 million a year earlier. This was on the back of increased revenue of RM45.8 million versus RM34.7 million as it saw a new variation order where it started the supply and installation works during the quarter.

Essentially, the counter has shown its upside potential given the untapped areas of growth and strong balance sheet to support its growth.