This article first appeared in The Edge Malaysia Weekly on December 25, 2023 - December 31, 2023

ITMAX System Bhd is The Edge’s pick for best initial public offering (IPO) among the seven listings on the Main Market of Bursa Malaysia that took place from Dec 1, 2022 to Nov 30, 2023. Listed on Dec 13, 2022, the counter racked up a 64.5% gain as at the Nov 30, 2023 cut-off date from its IPO price of RM1.07 per share — the strongest among the companies.

The company raised RM342.4 million from its listing, which, interestingly, makes it the second-largest technology IPO in Malaysia after that of CTOS Digital Bhd in July 2021 (RM1.2 billion).

ITMAX is a public space networked systems provider that focuses on lighting, video surveillance, traffic management and communications network services.

On its maiden day of trading, its shares opened at RM1.52 and surged to an intraday high of RM1.55 during the afternoon trading session — a 44.9% premium over its IPO price — before ending the day at RM1.38, or a 29% premium.

At its IPO price of RM1.07 a share, ITMAX was valued at a price-earnings ratio of 37.7 times based on its net earnings per share of 2.84 sen for the financial year ended Dec 31, 2021 (FY2021). As at Nov 30, the stock was trading at RM1.76, giving it a market capitalisation of RM1.81 billion.

The counter attracted particularly strong investor interest in mid-September after the company bagged its maiden project in Johor. The share price shot up from RM1.42 in mid-September to as high as RM1.85 on Oct 3, and continued to hold up well around that level as at mid-December.

Previously, ITMAX’s main focus was Kuala Lumpur with over 14 years of providing smart city integrated systems and solutions. However, in September, the group surprised the market when it secured two major contracts with a combined value of RM206.5 million in Johor.

It clinched a 15-year contract worth RM105.32 million to provide smart video surveillance services for the Johor Bahru City Council, followed by a 15-year contract worth RM111.2 million to provide smart video surveillance and smart traffic light system services for the Iskandar Puteri City Council.

ITMAX continues to secure more projects in Johor, with the latest one being a RM79.62 million contract to provide video surveillance services in Pasir Gudang. It is estimated that ITMAX’s total order book currently stands at about RM900 million.

It is worth mentioning that many companies with exposure to Johor have caught the eye of investors this year, especially after the government announced its plan to create a special financial zone there to boost the state’s investment, growth and economic activities.

Prior to its job wins in Johor, ITMAX garnered 70% of its revenue from Dewan Bandaraya Kuala Lumpur (DBKL) or Kuala Lumpur City Hall. At present, the group owns and operates about 8,600 CCTVs, of which 5,000 are for DBKL.

The listing exercise involved an offer for sale of 129.45 million existing shares and a public issue of 190.55 million new shares, for a total of 320 million shares.

Maybank Investment Bank was the principal adviser, joint bookrunner, managing underwriter and joint underwriter for the exercise. CIMB Investment Bank was a joint bookrunner and joint underwriter, while AmInvestment Bank was a joint underwriter.

Despite the political uncertainties at the time, the IPO — launched just a day after the appointment of Datuk Seri Anwar Ibrahim as the country’s 10th prime minister on Nov 24, 2022 — saw cornerstone and anchor investor demand exceeding the total IPO size by 3.3 times, and the final book-building tranche was oversubscribed by 7.7 times. Meanwhile, the retail offering was oversubscribed by 18.2 times.

The cornerstone investors included AHAM Capital, AIA, Eastspring, Great Eastern, Hong Leong Assurance, Kenanga Investors, Maybank Asset Management, Principal and CMY Capital, JP Morgan Asset Management and Lion Global.

In late September, ITMAX’s substantial shareholder Datin Afinaliza Zainal Abidin, who is a non-independent executive director, disposed of almost 7% (or 71.9 million shares) in the company via her vehicle Ganda Sensasi Sdn Bhd for RM122.23 million, or RM1.70 per share, paring her stake to 10.6%.

Of the shares she sold, 20.5 million was taken up by ITMAX non-independent non-executive director Tan Sri Dr Tan Boon Hock and his son William Tan (managing director and CEO) via Sena Holdings Sdn Bhd. No information was provided about the remaining 51.4 million shares. Despite the shareholding changes, ITMAX’s share price continued its upward momentum.

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