Datasonic (DSON)’s FY13 net profit of MYR81.9m met our expectations -at 101.4% of our full-year estimate. A second interim DPS of 2.0 sen was declared,  bringing  its  FY13  DPS  to  3.5  sen.  Management  declared  a surprise  1-for-1 bonus issue, which in our view,  is  intended  to reward its  existing  shareholders  by  further  improving  the  stock’s  liquidity. Maintain BUY, with our FV lifted to MYR4.08 (from MYR3.36).

• Largely  in  line.  DSON’s  FY13  revenue  surged  45.9%  y-o-y  to MYR260.7m,  mainly  driven  by  higher  sales  volume  in  relation  to  the supply of  MyKad.  EBIT more than doubled y-o-y to MYR101.0m on the back of higher economies of scale and the improved  yield of its passport contract. All in, FY13 core earnings soared  191.3% y-o-y to MYR81.9m, boosted  by  a  lower  effective  tax  rate  of  12.6%.  Meanwhile,  4QFY13 revenue  expanded  3.8%  q-o-q  and  72.9%  y-o-y  to  MYR72.6m,  while core earnings more than quintupled y-o-y, although it was  2.7% lower  qo-q due to higher depreciation expenses incurred during the quarter.   
• Surprise  “bonus”.  A  second  interim  DPS  of  2.0  sen  was  declared, bringing  its  FY13  DPS  to  3.5  sen.  This  implies  a  payout  ratio  of  29%, trumping  our  previous  FY13  estimate  of  2.4  sen.  To  our  surprise, management declared a 1-for-1 bonus issue, which will double its share base to 1.35bn upon completion. We believe the proposal  is intended to reward its existing shareholders by further improving its shares ’  liquidity.The company completed the 1-to-5 share split in mid-Dec 2013.
• Change of year-end.  Meanwhile, management has proposed to change its financial year-end to March (from December).  We have yet to factor this into our model to allow for fairer retrospective comparison purposes.    
• Maintain BUY. While making  no major changes to our assumptions,  we tweak  our  FY14F-FY15F  forecasts  0.8-1.2%  higher  for  housekeeping purposes.  In view of the likely improvement in trading interest  following the proposed bonus issue, we are bumping up our valuation to  a  25.0x P/E  (from  23.5x).  Rolling  forward  our  valuation  to  FY15,  our  FV  now stands  at  MYR4.08  (or  MYR2.04  ex-bonus).  Given  the  upside  of  over 13%, we maintain our BUY recommendation.

Financial Exhibits

SWOT Analysis

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

Company Profile
Datasonic  is principally involved in the provision of information and communications technology  (ICT) solutions. These  include smart card personalisation services, customisation of large-scale government ICT solutions, project management  and  technical consultancy services.

Recommendation Chart

Source: RHB