Datasonic  announced  on  Bursa  Malaysia  that  it  has  secured  a MYR220m order from the National Registration Department for 10m new MyKads.  This brings  the total outstanding  order  of  such cards  to  14m. As  the  announcement  came  in  within  our  expectations,  we  make  no major changes to our forecasts at this juncture. Maintain BUY,  with our FV unchanged at MYR4.08, based on a 25.0x CY15F P/E.

• Salient details.  Valued at MYR220m,  this new order for 10m MyKads is expected to be  delivered over  a period of two years from 1  July 2014 to 30  June  2016.  As  previously  guided  in  our  17  April  report  titled “Fundamentals  Remain  Intact”,  this  announcement  was  within  our expectations.  The  total  contract  value,  however,  came  in  marginally above  our  previous  MYR180m-190m  guidance.  We  gather  from management that this was  primarily due to the  inclusion of  the  provision of consumables as part of the contract.   
• Extension to its outstanding 4m order. On a separate note, Datasonic Group  (Datasonic)  also  announced  on  Bursa  Malaysia  that  it  has secured a tenure  extension of  its outstanding order of 4m MyKads.  Note that these 4m identity cards was supposed to have been delivered by 31 Dec  2013. Nonetheless,  management had to carry  this  forward to 2014 due to capacity constraints. With this extension inked, the group has now agreed to deliver the outstanding 4m MyKad copies by 30 June 2014.
• Retaining forecasts.  We make no major changes to our forecasts for now, given that the announcement was largely within our expectations. Our earnings estimates have already captured  the contribution from this new contract.
• Risks. Key risks include possible delays in contract awards and revenue concentration on its MyKad contract.
• Maintain BUY. All in, we maintain our BUY call on the stock, with our FV unchanged at MYR4.08,  based on  a 25.0x CY15F  P/E. Since  our recent recommendation  upgrade  on  17  April,  Datasonic’s  share  price  has surged by over 25%.

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Source: RHB