• Datasonic Group Bhd (Dsonic) has been awarded a 3-year contract from the Road Transport Department (RTD) valued at RM21.5mn for the supply and printing services of special category driving license cards.

• We view this positively as it marks Dsonic’s first contract to supply the driving license cards, underscoring the company’s strong reputation and proven capabilities. However, we make no changes to our earnings as we anticipate minimal overall impact.

• Maintain our BUY call on Dsonic with a target price (TP) of RM0.63. This is based on 17x PER (average 3-year historical forward PER) applied on FY25F EPS of 3.7sen.

To Supply Driving License Cards

Datasonic Group Berhad (Dsonic), through its wholly-owned subsidiary, Datasonic Technologies Sdn Bhd (DTSB), has been awarded a contract by the Road Transport Department (RTD) valued at RM21.5mn. The contract involves supplying and printing special category driving license cards over 36 months period, starting from 1 Nov 2024 until 31 Oct 2027. Under the Letter of Award (LOA), DTSB is required to:

i) Furnish a performance bond valued at RM358K to RTD, valid until 1-year post-contract or the last obligation date, whichever is later; andImplement the Professional Training and Education for Growing

ii) Entrepreneurs (PROTÉGÉ) programme, in line with government requirements; providing training for a minimum of 9 participants, at no additional cost to the government.

Our Take – Positive Development

We view Dsonic’s entry into the driving license card segment positively, as it underlines the company’s robust reputation and technical capabilities in delivering high-quality government solutions. This project not only reinforces Dsonic’s status as a reliable partner for government agencies but also highlights its potential to diversify further into other identification and security-related projects. Similar to other government projects, this contract is expected to yield a decent margin, supported by Dsonic’s existing production capacity to fulfil the order without significant capital investment.

No Revision to Earnings Estimate

We make no changes to our earnings forecast, as we expect initial earnings impact to be modest.

Maintain BUY, with a TP of RM0.63

We reaffirm our BUY call on Dsonic with a target price (TP) of RM0.63, pegged at 17x PER (average 3-year historical forward PER) to FY25F EPS of 3.7sen. Our positive outlook for Dsonic is bolstered by; i) its dominant position as the exclusive provider of MyKad and passport solutions, ii) promising overseas growth opportunities, iii) continuous diversification efforts across its business lines and iv) attractive dividend yield exceeding 7% at current share price.

Source: BIMB Securities Research - 30 Oct 2024