• DSONIC’s closed its 4QFY22 on a strong note after reporting over 100% YoY growth in revenue thanks to higher delivery of passport products and supply resumption of MyKad products to National Registration Department (NRD).

• We are optimistic on DSONIC prospects as we foresee the supply resumption for MyKad for 12-month period and pent-up demand for passports following the ease of travel restrictions worldwide to provide strong revenue push in FY23. DSONIC is also expected to be the front runner for a few projects tendered by the government i.e., new generation of MyKad contract, foreign worker card (i-Kad), and Digital ID given its proven track record in delivering security documents projects to the government since 2012.

• Maintain our BUY recommendation on DSONIC at a TP of RM1.06, pegged at 37x PER to FY23 EPS of 2.9 sen.

Strong Demand for Passport amid Reopening of Borders

DSONIC’s financials returned to black following a RM13m in core profit in 4Q22. This was in tandem with over 100% YoY jump in revenue thanks to higher delivery of passport products and supply resumption of MyKad products to National Registration Department (NRD). This pushed DSONIC’s 12-month core profit to expand by 49% YoY to RM10m. While DSONIC 12MFY22 revenue and EBITDA were in line with our estimates, its core profit trailed our forecast after accounting 77% of our full year forecast no thanks to higher-than-expected depreciation, finance cost, and higher taxation.

Outlook Remains Strong

We are optimistic on DSONIC’s business prospects as we foresee supply resumption for MyKad for 12-month period and pent-up demand for passports following the ease of travel restrictions worldwide to provide a strong revenue push for DSONIC in FY23. In addition, we believe DSONIC to be the front runner for a few projects tendered by the government including a new generation of MyKad contract, foreign worker card (i-Kad), and Digital ID given its proven track record in delivering security documents projects to the government since 2012.

Maintain a BUY call with TP of RM1.06

We maintain a BUY call and TP of RM1.06 on DSONIC, pegged at 37x PER to FY23 EPS of 3.0 sen. Our forecast implies a strong earnings recovery in tandem with pent-up demand for passports following the full reopening of international borders. This, along with DSONIC solid outstanding order book worth RM434.9m are expected to provide strong earnings visibility up to FY25F.

Source: BIMB Securities Research - 4 Jul 2022