Intelligent Monitoring Group (ASX:IMB): This >$200m All Ords company is Australasia’s largest independent security monitoring provider!

After a terrific FY24, FY25 was more difficult for Intelligent Monitoring Group (ASX:IMB) but it may have turned a corner.

In FY24, this company (which we will call IMG to avoid confusion with the Illawarra-based mutual bank IMB) made >$40m EBITDA, went from being the 3rd largest company in its industry to the largest and set the foundations for future growth. The company re-rated from $70m to >$200m and is now in the ASX All Ords.

FY25 was more difficult, but FY26 could be a better year.

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Introduction to Intelligent Monitoring Group (ASX:IMB)

Intelligent Monitoring Group is a provider of security solutions. It is Australasia’s largest independent security monitoring provider that ensures the safety and protection of over 210,000 businesses, homes, and individuals, round the clock. In August 2015, the company was listed through the reverse takeover of East Africa Resources. It was known as Threat Protect Australia until adopting its current name in 2021.

The company has grown both organically and through acquisitions, most notably, the acquisition of ADT. ADT did several things for IMG including taking it from the third largest provider to the first largest, it added 340 staff members and A$95m in revenue as well as DIY solutions to the company’s portfolio.

2024 was a pivotal M&A year too, with the company snapping up Adeva, AGC Integration and Alarm Assets. Adeva is a national security provider that was founded in 2013 and provides premier security services and data management technologies. It serves both the commercial and home security markets with products including intercoms, CCTV, personal safety alarms and commercial payment solutions.

Less than a month after unveiling the Adeva acquisition, IMG announced the acquisitions of AGC Integration and Alarm Assets Group (AAG). The company raised $19m in a Placement to fund these acquisitions. AGC is an enterprise-focused security provider that offers physical solutions such as IP Video Surveillance and Access Control, backed by technicians and service management staff. AAG is a diversified provider, offering home and commercial security services, including the installation, maintenance and monitoring of such systems.

IMG too has a blue-chip client base including government clients and ASX 100 companies. It also has investors including Black Crane, Allan Gray and MA Financial which cumulatively own more than half of the company.

In a secure industry, facing further growth

The security industry is a highly defensive industry to begin with. That is to say, the industry tends to be immune to macroeconomic conditions. The company has protected itself further with a defensive business model based on recurring revenue on a subscription basis, generated from a sticky customer base including government, personal emergency response, and other commercial customers.

Moreover, the security monitoring industry in Australasia is highly fragmented with a large number of small players. This situation works in favour of larger players such as Intelligent Monitoring Group which can use its strong market and financial position for further consolidation.

We see potential for further industry growth in 2 respects. First, the growth in DIY solutions. The penetration rate of 24-hour home security monitoring services in Australia is only 5%, compared with 23% in the US. The adoption of DIY security systems is the primary reason for higher penetration of home security products in the US.

The popularity of such systems has increased due to their low cost, ease of setup, and smartphone-friendly implementation. The versatility of DIY home security will allow non-traditional home security service providers to boost the overall home alarm system adoption rate.

Second, the growth in AI. Yes, we know the phase ‘AI’ is thrown around a lot and may not disrupt every single industry, and we do acknowledge that human control and intervention will be essential, but hear us out. IMG’s position as the largest player and its AI-solutions will ensure that it derives benefits.

AI-powered video analytics will allow security systems to automatically detect and track suspicious behaviour, and identify potential threats in real time. AI-powered security systems will progressively integrate with other technologies, such as drones, robots, and IoT devices, to create a more comprehensive and efficient security infrastructure. This will enable security systems to monitor and respond to threats across a wider range of environments and contexts.

FY24 was a great year but FY25 wasn’t so much

Intelligent Monitoring released its results for FY24, the 12 months to June 30 2024. The acquisition of ADT was only completed on August 1, hence it was only reflected in 11 months of the 12 in FY24. The company’s revenue was 400% higher than the year before. Of course, IMG’s revenue was increased by the ADT acquisition, although the result was aided further by IMG’s enhancement of the business. The monthly revenue run rate was doubled in 12 months.

IMG had guided to $33.5-34m normalised EBITDA and $32-32.5m adjusted EBITDA. It exceeded its normalised EBITDA guidance and met the higher end of its adjusted EBITDA guidance, recording $34.6m normalised EBITDA and $32.4m. The company’s EBITDA margin increased from 15.2% in FY23 and 26.7% in FY24. The company recorded a $13.9m loss on a statutory loss including abnormal items (including ADT acquisition, refinancing and other one-off costs). Without abnormal items, the company would have made a $12.9m profit.

The company’s FY25 goals included:

• Surpassing >$40m in EBITDA
• Refinancing its debt to a commercial banking facility
• Growing national coverage of its people
• Enhancing its technology operating platform, and
• Improving supplier relationships.

Ultimately, $40m in EBITDA was just missed due to the timing of several large service contracts being expected in early FY26. Shares fell after its first quarterly report of the year when its operating cash flows shrank from $3.7m to $0.8m – still in positive territory but driven down by acquisition costs.

And a week later, IMG raised $20m to buy Perth-based provider Dataline Visual Link. It was at this time it guided to EBITDA to be above $38m and investors never like it when a company downgrades its target. At least the company didn’t downgrade it a second time and did reach it.

FY25 revenue was $174.9m, up 44%, whilst its gross profit was $51.4m (up 10%). The company’s bottom line was in the red by $17.6m and this was up from $3m the year before. But the company claimed it was a successful year claiming it was the first full year it showed industry leadership.

Big ambitions for FY26 and beyond

The company is aiming to capture a 25-30% market share in 3-5 years. This will be driven by growth in security solutions in regional areas and among SMEs as well as the shift to AI-based and video analytics solutions.

Moreover, it would not just come from new customers but also from existing customers upgrading as well as services and maintenance from existing customers. Residential and SME customers could last 7 years whilst commercial and enterprise could last 15 years.

And the company itself claimed to be undervalued noting many of its peers in foreign markets traded at higher multiples. Looking at IMG’s multiples, the mere 0.5x PEG multiple for FY26 would suggest it is undervalued. MB’s P/E is 7.4x and its EV/EBITDA is 6.5x. Analysts covering the company agree, having a mean target of $0.91, implying over 50% upside from the current price of $0.60. They think that the company will meet its EBITDA target, suggesting $46.5m then $52.4m in FY27. Consensus estimates for the top line imply $213.9m in FY26 and $234m in FY27.

IMG boasted $24m cash at bank and a $35m acquisition facility as of the close of FY26. One of its early moves in FY26 was to buy Western Advance for $4.5m, which specialises in security solutions for the oil and gas sector. It is all well and good to keep expanding market share by M&A, but we think investors will likely want to see organic growth outpacing growth from M&A.

Conclusion

Our friends at Pitt Street Research covered the company during 2024.  It initiating coverage at A$0.57-0.75 per share then updated its target to A$1.05-1.23 in light of IMG exceeding the initial target price and its FY24 results.

We encourage readers interested in finding out more about the company (its history, the management, the forthcoming catalysts and risks associated with an investment in the company) to read Pitt Street’s in-depth reports.

As FY26 gets underway, IMG investors can be confident in the company. It is a leader in a defensive sector with tailwinds for organic growth and is coming off a record year so far as sale and customer numbers are concerned.

Intelligent Monitoring is a research client of Pitt Street Research.