Datasonic’s  share  price  has  retraced  by  26%  from  a  high  of  MYR4.85 following  Bursa’s  trading caution and  media reports  on  the possibility of  the  counter  being  designated  due  to  the  recent  spike  in  its  share price. At current  level, we believe investors should accumulate or stay invested in the company as its fundamentals are largely intact. Maintain BUY, with our FV unchanged at MYR4.08, based on a 25.0x CY15 P/E.

• Bursa caution triggers selldown.  On 2 April, Bursa Malaysia  issued a trading  caution over Datasonic shares, warning that the exchange  would not  hesitate  to  “take  appropriate  regulatory  action  to  ensure  fair  and orderly trading”, following the sharp  spike  in  the company’s  share price from MYR3.91 on 26 March to a high of MYR4.85 on 1 April. Separately, in a 4 April report, The Sun Daily highlighted the possibility of the counter being designated. These triggered the selldown  this week, with the stock closing at MYR3.58 yesterday. We see this as a healthy correction  given that the recent issuance of call warrants has fuelled speculative interest on the stock, with its fundamentals largely unchanged.
• Potential  acquisition?  A  StarBiz  report  said  Datasonic  is  eyeing Percetakan Nasional Malaysia Bhd (PNMB), which is currently owned by the Ministry of Finance.  PNMB, the  national printing arm,  was recently appointed  to  supply  the  identification  cards  of  foreign  workers  in Malaysia. If this  materializes,  it  would strengthen  Datasonic’s  foothold in the  provision  of  security  cards  in  Malaysia .  Currently,  the  group  is providing the MyKad and photopages of the new Malaysian passports.
• New contracts.  Management announced last Friday that it has secured a  MYR5.4m  contract  over  a  6-year  period  from  Majlis  Perbandaran Pulau  Pinang  for  the  supply,  installation  and  maintenance  of  closedcircuit television (CCTV) cameras. Yesterday, the group told Bursa that it has been appointed as the main sub-contractor to help set up a one-stop centre for Indonesian workers in Malaysia.  We expect this to contribute MYR2-3m annually to Datasonic’s bottomline over the next 2-3 years.
• Maintain BUY.  Following the recent  share price  retracement  which  we deem a healthy correction,  and  the more than  14%  potential  upside to our FV  of MYR4.08,  we advise investors to accumulate or stay invested in the company. Maintain BUY recommendation.

Financial Exhibits

SWOT Analysis

• Involved in the provision of smart chip-based ICT solutions, for 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