KUALA LUMPUR (Jan 10): Analysts anticipate a significant boost in Datasonic Group Bhd’s earnings, after the group received four contract extensions from the Ministry of Home Affairs (Moha) worth a total of RM175 million.
In a note on Wednesday, RHB Research said the contract extension which involves the supply of national identity (ID) cards, comprehensive maintenance services, and e-Passports solutions for another six months ending May 31, 2024, may have an upward price revision that will further enhance Datasonic’s earnings.
RHB Research has revised its earnings forecasts for Datasonic by 0.5% for the forecast financial year 2024 (FY2024F), 26.1% for FY2025F, and a whopping 49% for FY2026F, after factoring in the new average selling price and volume assumptions.
The research house also maintained its “buy” rating on Datasonic with a higher target price (TP) of 63 sen (from 57 sen), based on an unchanged 20 times price-to-earnings (PE) valuation for the forecasted calendar year 2024 (CY2024F).
“Moving forward, management remains committed to clinching the long-term contracts for ID card and passport solutions, along with the new hardware and printing systems, and other projects which include the foreign passport project, identity management system, auto-gate solution, and MyKid,” RHB Research said.
On Tuesday, Inter-Pacific Research Sdn Bhd analyst Wong Choo Hong told The Edge via e-mail that the contract extensions have provided the group with better earnings visibility for the second half of 2024 (2HFY2024) and have reaffirmed a healthy order book assumption, which is expected to sustain well into FY2025F.
The analyst expects Datasonic’s MyKad-related orders to pick up in the fourth quarter of 2024 (4QFY2024) and will fill the revenue gap following a significant decline in 2QFY2024, after the group completed its MyKad delivery.
Datasonic’s order book currently stands cumulatively at RM409 million, after factoring in the RM175 million worth of contract extensions by Moha, said RHB Research.
MIDF Research analyst Martin Foo Chuan Loon, however, told The Edge that he did not plan to revise his rating, as the latest contracts were already anticipated and that the six-month period for the latest contracts was to give Moha time to evaluate the contracts given and for Datasonic to supply the products first.
Foo said Datasonic will provide new designs for the products it had previously supplied to the government. With the market lacking strong contenders for security-related integrated information and communication technologies (ICT) solutions providers, the analyst believes that Datasonic will continue to get more jobs from the National Registration Department (JPN).
At the time of writing on Wednesday, shares in the provider of integrated ICT solutions for security-related transactions were unchanged from its last closing price of 45.5 sen, translating into a market capitalisation of RM1.29 billion.