RHB Research said concerns over the non-renewal of contracts were temporarily eased as the Home Ministry had recently awarded contract extensions to Datasonic.
PETALING JAYA: Potential contract renewals concerning national security-related solutions as well as recent contract extensions are expected to support Datasonic Group Bhd
’s earnings growth in the quarters ahead.
RHB Research said the information and communication technology solution provider’s revenue and core profit for the financial year 2023 (FY23) surged by 153% year-on-year (y-o-y) and 6.3 times y-o-y to a multi-year high of RM344.7mil and RM75.7mil, underpinned by strong demand for passport and MyKad-related solutions.
“We emerged from Datasonic’s update feeling positive on its FY24 outlook, which should be supported by the robust demand for its various solutions and the contribution of a new project.
“We believe its existing mission-critical national security contracts are likely to be extended, given the imminent expiry to ensure continuity of supply.
“The company’s ability to secure contract extensions should lift the current overhang on its share price.
“Its below-mean valuation, meanwhile, presents a good entry point,” the research house said in a report yesterday.
RHB Research said concerns over the non-renewal of contracts were temporarily eased as the Home Ministry had recently awarded contract extensions to Datasonic.
“These extensions consist of a three-month extension on the supply of MyKad, MyTentera, MyPOCA raw cards for RM12.5mil, a six-month extension of comprehensive maintenance services of card personalisation centres for an additional contract value of RM9.9mil, as well as an amendment to the ceiling value for the additional supply of Malaysian passport chips for RM37.6mil,” the research house said.
Datasonic’s outstanding order book is estimated at RM387mil (with the new contract extensions).
On top of that, the group is pursuing contract renewals for the supply of MyKad and passport-related solutions.
It is also pursuing renewal for maintenance contracts including the auto-gate maintenance, Public Key Directory and Public Key Infrastructure-related solutions.
“Management is also still actively pursuing new programmes to further boost its order book, such as digital identification cards and the identity management system under the memorandum of agreement with the Urban Planning, Housing and Territorial Development Ministry of the Republic of Guinea,” RHB Research said.
In order to eliminate the risk of interruptions that may affect the delivery of public services, given the imminent expiry of existing contracts by the second half of 2023 in the absence of any new tender, the research house is optimistic the extensions of contracts for Datasonic concerning national security-related solutions are highly likely.
“These contracts were initially won through an open tender process.
“Manufacturing readiness, the quality of services and products and the technical know-how that Datasonic has regarding mission-critical products are the other vital factors.
“Its FY24 earnings are likely to hit another high, on the back of sustained strong demand and commencement of the new iKad supply contracts,” RHB Research said. RHB Research maintained a “buy” call on Datasonic with a target price of RM0.57.
