Datasonic’s  (DSON)  3QFY13  net  profit  of  MYR23.4m  trumped  our previous guidance  for  MYR20m-MYR21m due to  a  lower-than-expected effective tax rate on the commencement of its passport contract, which is  tax-exempt.  This prompts us to  revisit  our model and  lower  our tax rate assumption, as well as upgrade our FY13F-FY15F EPS forecasts by 2.2-4.9%.  Maintain  BUY,  with  our  FV  lifted  to  MYR11.82  (from MYR11.56).

• Decent quarter boosted by lower effective tax rate.  DSON’s 9MFY13 revenue  surged to  MYR188.2m (+37.6% y-o-y),  driven mainly by  higher sales  volume  in  relation  to  the  supply  of  MyKad  as  well  as  the commencement  of  its  contract  to  provide photopages  for  national passports  in  3QFY13.  EBIT,  meanwhile,  more  than  doubled  y-o-y  to MYR73.7m  owing  to  higher  economies  of  scale  as  well  as  the  betteryielding  nature  of  its  passport  contract.  All  in,  9MFY13  core  earnings soared  to  MYR59.1m  (+142.6%  y-o-y),  boosted  by  a  lower-thanexpected  effective  tax  rate.  On  a  quarterly  basis,  3QFY13  revenue jumped 18.4% q-o-q and 30.6% y-o-y to MYR69.9m while core earnings expanded 13.9% q-o-q and 188.3% y-o-y to MYR23.4m.   
• Likely  to  close  year  with  strong  4Q.  Taking  into  account  the  betterthan-expected set of results, we revisit our model and tweak our tax rate assumptions lower.  Accordingly,  we  upgrade  our EPS forecasts by 2.2-4.9%  for  FY13F-FY15F.  Based  on  our  FY13F  net  profit  estimate  of MYR80.8m, we are projecting  for  DSON’s 4QFY13,  due  to be released by end-Feb 2014,  to  amount to  MYR21m-MYR22m. While no dividend was declared for 3QFY13, we foresee management paying a final DPS of 4.5 sen in 4QFY13, based on our assumption of a 20% payout ratio.  
• Maintain  BUY.  Following  our  earnings  revision,  we  lift  our  FV  to MYR11.82,  based  on  an  unchanged  FY14  P/E  of  16.5x.  Given  the potential upside, we maintain  our BUY recommendation.  While DSON’s share price has run up by more than  45% since we initiated coverage on 12  Nov,  the  stock’s  currently  attractive  market  valuation  (at  20-25% discount  to  its  peers)  vis-à-vis  its  significantly  larger  earnings  base warrants our bullish stance.

Financial Exhibits

SWOT Analysis

•   Involved in the provision of smart chip-based ICT solutions, in which it has an established presence

Company Profile
Datasonic (DSON) is principally involved in the provision of Information and Communications Technology (ICT) solutions that include smart card personalisation services, customisation of large-scale government ICT solutions, project management, as well as technical consultancy services.

Recommendation Chart

Source: RHB