This article first appeared in The Edge Malaysia Weekly on October 9, 2023 - October 15, 2023

THE year 2023 is proving to be a breakthrough one for ­ITMAX System Bhd with large contract wins in a new city.

The company, which had been providing smart city integrated systems and solutions primarily in Kuala Lumpur over the past 14 years, last month secured not one but two major contracts worth a combined RM216.5 million in Johor, vindicating its strategy of expanding the group’s presence into the southern region, says ITMAX managing director and CEO ­William Tan Wei Lun.

“Over the years, most of our projects [have been] in KL but the intention was that if we could do it successfully in KL, which is the capital of Malaysia, we can do it in other states,” he tells The Edge in his first exclusive media interview since ITMAX was listed on the Main Market of Bursa Malaysia in December last year.

Tan describes 2023 as a breakthrough year for ITMAX, as the group clinched a 15-year contract worth RM105.32 million to provide smart video surveillance services for the Johor Bahru City Council in September, followed by another 15-year contract worth RM111.2 million to provide smart video surveillance and smart traffic light system services for the Iskandar Puteri City Council.

“To offer a perspective, Johor has a total of 16 local councils, which allows plenty of opportunities for us. As a homegrown entity and with our first-mover advantage, we are confident and hopeful of more contract wins in Johor,” he remarks.

Including the two major contract wins in Johor, ITMAX’s total order book currently stands at RM823.8 million.

Tan, 31, is the son of Tan Sri Tan Boon Hock, a police officer-turned-entrepreneur. Sena Holdings Sdn Bhd — the vehicle of the father and son — is the controlling shareholder of ITMAX with the lion’s share of 53.25%.

Interestingly, Boon Hock and his wife Puan Sri Lim Sho Hoo also control Optimax Holdings Bhd — another Main Market-listed company — owning 56.78% of the eye specialist service provider.

The 68-year-old former cop is deputy executive chairman of Optimax, and sits on the board of ITMAX as a non-executive director.

Among ITMAX’s top 30 largest shareholders are Kenanga funds, Principal funds, AIA Bhd, Manulife Investment Shariah Progress Fund, Affin Hwang Aiiman Growth Fund, Eastspring Investments Small-cap Fund and Phillip Capital Management Sdn Bhd.

It is worth noting that CMY Capital Sdn Bhd — an investment holding company founded by prominent businessman and savvy investor Tan Sri Chua Ma Yu — also owns six million shares or a 0.58% stake in ITMAX.

Since listing, ITMAX’s share price has gained 66%, closing at RM1.78 last Wednesday, from its initial public offering (IPO) price of RM1.07. At current prices, ­ITMAX has a market capitalisation of RM1.83 billion and is trading at a historical price-earnings ratio (PER) of 33 times.

In the first half ended June 30, 2023 (1HFY2023), ITMAX’s net profit almost doubled to RM30.3 million, from RM15.45 million a year ago (see chart). Its cash and bank balances stood at RM195 million.

In a Sept 25 research report, Maybank Investment Bank analysts were optimistic on ITMAX’s prospects of securing letters of award (LOAs) to provide closed-circuit television (CCTV) systems for Pasir Gudang and Kulai town councils “in due course”.

“There is also further scope for LOA awards in the remaining 12 Johor districts, we believe,” the analysts write.

As momentum picks up in Johor, the research house has turned bullish on ITMAX’s long-term prospects, and has maintained a “buy” call while raising its target price to RM2.10.

Tan says ITMAX started as a mechanical and electrical (M&E) firm in 2001. About eight years later in 2009, the group ventured into the business of supply, installation and maintenance services for networked lighting systems and smart traffic controller systems, mainly focusing in the KL area.

“We are proud to say that over the past 14 years or so, our Malaysian-made products have been replacing the incumbent foreign-branded systems,” he says.

Every city or town in every country, Tan observes, has its own traffic patterns because road users from different places have different driving behaviours.

“We believe, ITMAX, as a Malaysian company, understands our country’s traffic systems better and, hence, has derived smart traffic solutions that are adapted for our country,” he says.

To enhance the efficiency of its traffic controller systems, ITMAX implemented CCTV and developed artificial intelligence (AI) features in its system for the purpose of ­real-time data collection.

Conventionally, says Tan, a physical magnetic wire loop is embedded in the road to serve as a vehicle detector, and when a car reaches the traffic light junction, the wired detector is able to detect the presence of a vehicle when it arrives and stops on top of it.

“However, when using our integrated CCTV with AI-featured system, we can monitor a richer set of data such as the vehicle queue length, types of vehicles and the traffic volume. As such, when there are more cars, the traffic controller can dynamically allocate more time for a green light passage. We call this our virtual loop feature,” he explains.

To date, says Tan, ITMAX’s research and development (R&D) team has developed over 21 AI features, which have been integrated into various systems to support its clients in the field of city management.

“Using AI to harness the power of computer vision technology, we enable city councils to automatically detect incidents and events on the road and in traffic, such as accidents, traffic offences, objects on roads and illegal obstruction on the road.

“In addition to these in-house innovations, we have also developed customised AI features for city management operations such as the automatic detection and monitoring of potholes, flash floods, water ponding on roads, advertising buntings, hawkers and illegal rubbish dumping,” he says.

At the same time, ITMAX has installed smart control devices on 45,000 LED street lights in KL.

“Our lighting system incorporates our own designed and manufactured controllers to automate dimming and on-off functions in reaction to environmental conditions. Besides, when a street light has a problem, our smart devices will automatically notify the system at the control centre.

“Through the system, our support and maintenance will know exactly which light needs to be fixed and be able to respond to the actual problem site instead of deploying vehicular patrols around the city,” says Tan.

ITMAX also provides video surveillance and analytics services to the city councils. Today, the group owns and operates about 8,600 CCTVs, of which 5,000 are for Dewan Bandaraya Kuala Lumpur (DBKL).

Moreover, ITMAX has laid more than 400km of underground fibre optic cables, connecting and integrating its networked lighting systems, smart traffic controller systems and the smart video surveillance systems to the Kuala Lumpur Command and Control Center’s (KLCCC) city management integration platform.

Tan points out that he would like ITMAX to be known not just as a smart city solutions provider, but also as an end-to-end digital infrastructure provider.

“Essentially, ITMAX is a technology company. Just to give you a comparison, Singapore has over 100,000 CCTVs, Bangkok has 77,000, while Ho Chi Minh City has 47,000. Whereas in KL, there are only 5,000 CCTVs for the city. In other words, we are still at a nascent stage and our growth story is far from over,” he says.

Tan does not want to comment on ITMAX’s share price, nor does he want to provide forecasts of the group’s financial results. “All I can say is that including the two recent contract wins in Johor, our order book will provide earnings visibility and recurring income for us in the next 10 to 15 years. We are confident that our financials will improve going forward as we see opportunities to expand offerings in Johor and other states in Malaysia.”

Tan adds that apart from the public sector, ITMAX could also penetrate the private sector, such as the residential and commercial markets.

For instance, in July the group bagged a RM40 million contract from Segamat Specialist Hospital Sdn Bhd for the design and provision of smart healthcare systems services.

“If we could provide smart solutions for hospitals, we could do the same for shopping malls, office towers, highways, condominiums and public parking,” he says.

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