Datasonic Group ('Datasonic') is an ICT solutions provider involved in the provision of smart card personalisation, customisation of software and hardware solutions, project management, consultancy, R&D and technical consultancy. Since it was established in 1980, the group has formed a strong relationship with several government agencies such  as National Registration Department (NRD) and Immigration Department of Malaysia to provide smart card personalisation and customisation of software and hardware solutions. The group has secured total contracts amounting to RM531.5m as of 14 June 2012, of which the key contributor to the group's order book is the sale of cards segment, which accounted for RM357.8m or 67.3%. Based on the above order book and their respective targeted completion date, we expect the group FY12 and FY13 turnover to grow  by +48% YoY and 12% YoY to RM116m and RM129m, respectively. All in all, we expect the group to record PAT of RM17.5m (+10.1% YoY) and RM21.8m (+24.6% YoY) in FY12 and FY13, respectively. While we are not assigning any ratings to the stock, we reckon that its fair value should be pegged at RM2.18, based on a FY12 PER of 9.0x (the average FBMKLCI Small Cap PER).

One-stop centre for smart card personalisation.  Datasonic is a onestop outsourcing centre for financial institutions  and corporate customers with regards to the personalisation of their ATM/PMPC and EMV cards. The group's regional personalisation solution ('RPS') centre has obtained the certification from various bodies such as Visa International, MasterCard International as well as Malaysia Electronic Payment System on card issuance. This has enabled the group to issue all kinds of ATM, debit and EMV card for all its banking customers and provides them the competitive edge in terms of technical strength. 

The group has a strong order book of RM531.5m as of June 2012 with most of the orders secured from the local government agencies. The key contributor to the group's order book is its sale of cards segment, which accounted for RM357.8m or 67.3% of the order book.  We believe the segment is related to a  contract where Datasonic is required to supply 10m new passport datapages to Immigration Department of Malaysia during the next five years from 2013 onwards. We understand that the balance of the remaining order book is scheduled to be completed by FY13. 

Experienced leadership team with a strong relationship with government agencies. The group is led by an experienced Board with strong relationship to the various government agencies. The group's dedicated management team has been successful in formulating and implementing its strategic plans in the past few years and also in building a sound operational track record. 

Expecting a strong revenue in FY12. Based on the group's order book and their respective targeted completion date of each of the contracts, we expect the group to achieve RM116m (+48% YoY) and RM129m (+11% YoY) turnovers in FY12 and FY13 respectively. Its FY12 and FY13 net profits meanwhile are expected to be at RM17.5m (+10% YoY)  and RM21.8m (+24% YoY) respectively. 

Downside risks in the stock are 1) any unfavourable operational environments, 2) rapid changes in technology and 3) its dependency on its parent company ' Dibena Enterprise and its end customer, NRD (National Registration Department).

Source: Kenanga