• Maintain BUY (TP: RM0.63). Datasonic Group Berhad (Dsonic) delivered a commendable 1QFY25 results, with revenue jumped by +7% YoY to RM90.8mn from RM84.8mn in 1QFY24. The growth was driven by stronger sales in its core segments; smart cards, passports, and personalisation services which account for more than 80% of its total revenue. In tandem, core PATAMI surged by an impressive +48% YoY to RM27.1mn in 1QFY25 due to the enhanced operational efficiency and lower effective tax rate of 25.2%, contracted by 3.3ppts from 28.5% in 1QFY24. Overall, 1QFY25 core PATAMI was inline with expectations, comprising 26% of our full-year forecast and 27% of consensus estimates. We reaffirm our BUY call for Dsonic, with an unchanged target price of RM0.63, derived from average 3-year historical forward PER 17x, applied to the FY25F EPS of 3.7sen.

• Key highlights. On QoQ basis, 1QFY25 revenue and PATAMI declined by - 22% and 35% respectively. This was primarily due to lower sales of smart cards, passports and personalisation services. In 1QFY25, Dsonic has declared its first interim single-tier exempt DPS of 0.75sen (1QFY24:0.6sen), representing a payout of over 70% and 6.2% yield at current share price, underlining its commitment to delivering good returns to shareholders.

• Earnings Forecast. No changes to our earnings forecast.

• Outlook. We believe Dsonic is well-positioned to seize growth opportunities in the rapidly expanding biometric and security solutions market, driven by rising global demand for advanced security technologies. The company’s strategic expansion and strong market presence in smart cards and personalisation services further support its growth prospects, in our view. While extending passport validity from 5 to 10 years poses a challenge, Dsonic’s commitment to innovation and diversification should mitigate this risk and sustain long-term profitability. Moreover, consistent dividend payouts highlight the company’s resilience and potential for sustainable value creation, making it a compelling investment opportunity.

Source: BIMB Securities Research - 30 Aug 2024