• Overview. Datasonic Group Berhad (DSONIC) 2QFY23’s core  earnings rebounded strongly to RM25mn from only RM1mn and  RM12mn in 2QFY22 and 1QFY23 respectively. This was in tandem  with solid revenue growth driven by higher supply of smart cards,  passports, and personalisation services following the full reopening  of international borders.

• Key highlight. EBITDA margin expanded by 33.6 ppts and 11 ppts to  49.2%, higher than the pre COVID-19 level thanks to solid demand  for passport-related products.

• Against Estimates: Inline. DSONIC reported an impressive 1HFY23  core earnings of RM37mn versus a loss of RM4.6mn in 1HFY22 after  successfully securing the contract for the supply of MyKad-related  products in 4QFY22 and strong demand for passport renewal.  Overall, 1HFY23 core earnings were in line with our and consensus’  estimate, making up at 49% of our full year forecast.

• Dividend. A DPS of 0.50 sen was declared, implying a payout ratio of  57%.

• Outlook. We remain upbeat on DSONIC’s FY23 business outlook driven by solid demand for passports and MyKad nationwide as well  as new earnings contribution from the foreign worker card (I-Kad).

• Our Call. Reiterate our BUY call at an unchanged TP of RM0.80,  pegged at 30x PER to FY23F EPS of 2.7 sen.

Source: BIMB Securities Research - 30 Nov 2022