DSONIC Secured a Contract for the Supply of I-Kad
Datasonic Group Berhad (DSONIC) announced that it has received a Letter of Award (LoA) from the Ministry of Home Affairs (MOHA) on 7th November 2022 for the supply of foreign worker card (I-Kad) for Immigration Department of Malaysia. The contract is worth RM140mn and expected to be delivered for 36 months commencing from 1st November 2022 to 31st October 2025.
Positive on the Contract Award
We are positive on the announcement as we believe the award has successfully proven DSONIC competitive advantage and capability in delivering the national security-related solutions. According to the management, DSONIC is expected to deliver 10mn of I-Kad during the contract period. In addition, DSONIC’s I-Kad will be embedded with a chip for security measures (bio-metric technology) and authentication purposes by authorities.
To recap, I-Kad was introduced in 2014 to help the authorities track the illegal immigrants. However, the Immigration Department ceased the issuance of I-Kad on 17th July 2019 due to 1) failure of the assigned company to deliver the I-Kad, 2) late issuance, and 3) lack of authentication systems resulting in those with valid I-Kad being arrested
Revised Up Earnings Assumption
We raised our FY23-25F’s earnings forecast by 17% - 27% (Table 1) to impute the 3-year contract contribution to the company.
Reiterate BUY at a Higher TP of RM0.80
Reiterate our BUY call on DSONIC with a higher TP of RM0.80, pegged at 30x PER of FY23F EPS of 2.7 sen. At a current share price, we believe DSONIC offers an attractive valuation to investors given the strong demand for passports and MyKad amid the easing of worldwide movement restrictions which are roundly positive for its earnings.
Source: BIMB Securities Research - 8 Nov 2022
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