Datasonic Group Bhd is expected to reap a 7% yield from contract extension worth RM81.2 million awarded by the Home Affairs Ministry for financial year 2024/25 ending 31 Mar 2025, according to RHB Investment Bank Bhd (RHB Research).
RHB Research has maintained the BUY call on Datasonic and the target price of RM0.68, reflecting a potential upside of 67.9% over market valuation.
As at 4:16pm Dec 3, the stock of Datasonic traded at RM0.405, up one sen from its previous closing price of RM0.395. (Stock updates from Bursa Malaysia)
Datasonic is a security-based ICT solutions provider with track record in mission-critical national projects in Malaysia. The group is favoured by analysts due to its niche strength, healthy yields, strong cash flow, and potential for new project wins.
The extension, which covers the supply of national identity cards and comprehensive maintenance services, is valid for a year ending Nov 30, 2025. The contract extension specifically includes the supply of MyKad, MyTentera, and MyPOCA raw cards, along with the associated consumables and card personalisation services at the National Registration Department (NRD), or better known as Jabatan Pendaftaran Negara (JPN) locally.
According to RHB Research, the extension of this contract is aligned with their expectation and should pave the way for future contracts, particularly in the passport-related solutions sector. Analysts noted that the authority is currently assessing a new generation of MyKad and a new printing system before considering a long-term contract. Margin expansion for Datasonic is also anticipated due to adjustment in average selling prices (ASP). The outlook for the balance of the financial year remains optimistic.
With this extension, Datasonic's orderbook is now valued at over RM100 million. The group is also looking to expand into more overseas projects, capitalising on their cost competitiveness and the quality of their security document offerings.
The share price overhang, primarily caused by uncertainty around the renewal of MyKad and passport-related contracts, is expected to ease with the securing of the contract extension.
