• Datasonic Group Berhad (DSONIC) announced that it has received  a Letter of Award (LoA) from the Ministry of Home Affairs (MOHA)  for the supply of foreign worker card (I-Kad) worth RM140mn for  36 months (1st November 2022 – 31st October 2025).

• According to the management, DSONIC is expected to deliver  10mn of I-Kad during the contract period. In addition, DSONIC’s IKad will be embedded with a chip for security measures and  authentication purposes by authorities.

• We raised our FY23-25F’s earnings forecast by 17% - 27% to  impute the 3-year contract contribution to the company.

• Reiterate our BUY call on DSONIC with a higher TP of RM0.80,  pegged at 30x PER of FY23F EPS of 2.7 sen.

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