While  we  still  hold  the  view  that  Datasonic  is  fairly  valued  at  this juncture,  based on the contracts it has  in hand, we take a look at some of the jobs that could potentially materialize over the next  3-12  months. Should  these  materialize,  we  see  room  for  a  further  re-rating  in  our earnings  forecasts.  For  now  though,  our  NEUTRAL  call  remains,  with our FV unchanged at MYR2.04.

• Potential  fuel  subsidy  contract.  StarBiz  recently  reported,  citing unnamed  sources,  that  Datasonic  could  soon  secure  a  contract  to facilitate  the  allocation  of  petrol  subsidies.  Meanwhile,  an  unconfirmedNew  Straits  Times  report  said  a  multi-tier  fuel  price  scheme  may potentially  be  implemented  by  as  soon  as  September.  We  think  thisproposal  makes  sense  since  the  Government  intends  to  rationalize  its existing  subsidy  scheme.  We  note  that  out  of  the  total  MYR40bn  in subsidies, fuel subsidies take up more than MYR22bn a year. Should the plan go ahead,  we believe  Datasonic stands a good chance  of securing a role in the  scheme,  given  that it also  manufactures the  MyKad.  This may  ensure  full  integration  of  the  proposed  new  fuel  subsidy  scheme with the existing MyKad platform.
• Healthcare  initiative.  Management  is  also  looking  to  digitise  patients’ medical  and  health  records  into  their  MyKads.  Such  a  system  may enable  healthcare providers to better  track patients’ data.  As  there are 140 public hospitals  and  210 private hospitals  in all, we see enormous potential in this area, should the Health Ministry roll out this plan.
• CCTV  projects.  Recall that the company was  involved in the installation of  closed-circuit television (CCTV) security camera systems   in Penang.We believe that  management may look  at replicating this  model in other parts of  Malaysia as the Government is exploring ways to reduce crime, which  is  one of the  National Key Results Areas  aimed at  improving the socio-economic well-being of Malaysians.
• Maintain  NEUTRAL.  Although  it  is  too  early  to  quantify  the  potential earnings accretion from these initiatives,  we like Datasonic’s chances of securing them should the Government decide to roll them out,  given the company’s  success  in  implementing  the  latest  version  of  MyKad.  We think this could provide room for another re-rating. Retain NEUTRAL call for now, with FV unchanged at MYR2.04, based on a 25.0x FY16 P/E.  

Source: RHB