Datasonic Group Berhad

• Datasonic Group Berhad (DSONIC) has received a Letter of  Extension (LoE) from the Ministry of Home Affairs (MoHA) for the  supply of MyKad, MyTentera, MyPOCA raw cards and  consumables for a 3-month period, for a contract amount valued  at RM12.5mn.

• Although the contract extension is only for 3 months, we are  confident that DSONIC will continue to deliver MyKad, MyTentera,  and MyPOCA products to the government, as the management  indicated that there is no new tender for MyKad contract currently.

• No change to earnings estimates as we had incorporated into our forecast this contract win. Based on our forecast, we expect  DSONIC to supply approximately 2.5mn – 2.6mn of MyKad’s chips  and raw cards, and 2.8mn - 2.9mn of MyKad consumables in FY24.

• Reiterate our BUY call on DSONIC at RM0.80 TP, pegged at 30x PER  on FY23 EPS of 2.7 sen.

Extension of MyKad Contract

Datasonic Group Berhad (DSONIC) announced on 16th March 2023 that  it has received a 3-month contract extension (15th Feb 2023 - 14th May  2023) for the supply of MyKad, MyTentera, MyPOCA raw cards and  consumables from the Ministry of Human Affairs (MoHA) for an  additional contract value of RM12.5mn.

DSONIC to Remain as MyKad’s Sole Provider for Now

Although the contract extension is only for 3 months, we are confident  that DSONIC will continue to deliver for MyKad, MyTentera, and  MyPOCA products to the government. According to the management,  the process for a new tender will take around 1 year to complete.  Meanwhile, it will take another 6 months for the awarded company to  do the necessary work, including securing the raw materials. As of now,  management indicated that there is no new tender for the MyKad  contract.

No Change to Earnings Estimate

No change to our earnings estimates as we have already incorporated  a recurring contribution from the MyKad-related segment into our  earnings forecast. Based on our forecast, we expect DSONIC to supply  approximately 2.5mn – 2.6mn of MyKad’s chips and raw cards, and  2.8mn - 2.9mn of MyKad consumables in FY24.

Reiterate BUY at TP of RM0.80

Maintain BUY on DSONIC at RM0.80 TP, pegged at 30x PER on FY23 EPS  of 2.7 sen. We remain sanguine on DSONIC business prospects in 2023  driven by robust demand for passports and MyKad products.

Source: BIMB Securities Research - 21 Mar 2023