Albeit smaller in quantum vis-à-vis its previous Johor contracts, Maybank IB views ITMAX's 2nd CCTV contract award in Penang positively as it lays the necessary groundwork for its future expansion in the state. Having previously imputed for contribution from Penang, the FY24-26E earnings forecasts are unchanged with a BUY rating and TP of MYR4.40 are also maintained.
Maybank IB said ITMAX remains its top MY software pick for its compelling outlook as Malaysia's leading "smart city" player. Awarded 2nd LOA by MBPP. ITMAX announced on 7 Jan that it had accepted a Letter of Award (LOA) from Majlis Bandaraya Pulau Pinang (MBPP) for work in relation to the upgrading and maintenance of 513 CCTVs on Penang Island. The LOA has a
tenure of 69 months, commencing on 13 Jan 2025 to 12 Sep 2030 and carries a contract value of MYR11.8m. The first 9 months of the contract will cover the upgrading of 221 of the 513 existing CCTVs with traffic related AI features, which will then be followed by a comprehensive maintenance period of 5 years for all 513 units. Eyeing another 500+ CCTVs under MBPP
Recall that ITMAX was awarded its 1st LOA by MBPP last year for the provision of 48 new AI feature-enabled CCTVs (disclosed in Aug 2024).
Although unit ASPs for this 2nd LOA are substantially lower (c.MYR385 per CCTV/month) than its 1st MBPP contract (>MYR1k per CCTV/month), capex deployment is expected to be minimal as the upgrades are expected to be rolled out on existing infrastructure. The house said it understands there are currently c.1K+ CCTVs under MBPP's purview on Penang Island, with the remaining c.500 units coming due for upgrades later this year.
Spare capacity for "smart city" growth in Penang
Despite still being in its infancy, ITMAX has positioned itself favourably to ride on the tailwinds of Penang's "smart city" transformation journey. Maybank IB expects Penang Island alone to require c.10k CCTVs to achieve full surveillance coverage. By that metric, and with existing coverage at just over 10%, we opine there is still room in Penang for ITMAX's future growth
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