• Maintain BUY (TP: RM0.63). Datasonic Group Berhad (Dsonic) registered a flat 1HFY25 numbers, with revenue declining marginally by 0.2% YoY to RM171.8mn from RM172.07mn, due to reduced demand for smart cards, passport and personalisation services. Core PATAMI for the period however surged by 34.4% to RM48.7mn from RM36.2mn, thanks to the enhanced operational efficiency. This is largely in line with expectations, making up 47% of our estimates and 44% of the consensus forecasts. Nevertheless, we are taken aback by the absence of dividend for this quarter (2QFY24: 0.6sen), particularly given its track record of consistent dividend payouts (average payout ratios of >80%). We maintain our BUY call at 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. In 2QFY25, revenue declined by 7.1% YoY to RM81mn, but core PATAMI rose 20.5% YoY to RM21.6mn, attributed to the absence of ESOS expenses and the write-off of investment in an associate in 2QFY24. On a QoQ basis, revenue fell by 10.7%, and core PATAMI dropped by 20.1%, impacted by lower supply of smart cards, passports and personalisation services. Notably, these segments contributed approximately 87.2% of total revenue for 1HFY25, slightly down from 88% in 1HFY24.

• Earnings Revision. No changes.

• Outlook. We remain optimistic on Dsonic’s growth prospects, to be fuelled by: 1) higher delivery of i-Kad, 2) higher deployment of autogates, as well as 3) its strategic expansion and strong market presence in smart cards and personalisation services, both globally and domestic. As the government recently emphasis on a new generation with enhanced security features ID card for Malaysians, we believe Dsonic will be the frontrunner for the initiative, underscoring its potential for long term growth.

Source: BIMB Securities Research - 29 Nov 2024