• Datasonic Group Berhad (Dsonic) has received and accepted Letter of Extensions (LOEs) from the Ministry of Home Affairs (MOHA) with a cumulative contract value of RM150.45mn.
• These 12-month extensions, effective from 1st Dec 2024 to 30th Nov 2025, include: i) supply of the Malaysian passport documents, and ii) supply of the polycarbonate biodata pages.
• We view these contracts awards positively as they affirm Dsonic's expertise in the passport solutions domain. However, we notice the absence of an LOE for the passport chips' supply, which is typically awarded alongside these extensions.
• No changes made to our projections. We maintain our BUY recommendation on Dsonic with a target price of RM0.63, based on 17x PER (average 3-year historical forward PER) applied to FY25F EPS of 3.7sen.

Longer Extensions

The Ministry of Home Affairs (MOHA) has granted Letter of Extensions (LOEs) to Datasonic Technologies Sdn Bhd (DTSB), a wholly-owned subsidiary of Datasonic Group Berhad (Dsonic), cumulatively valued at RM150.45mn. The LOEs encompassed: (i) supply of polycarbonate biodata pages worth RM93.3mn, and (ii) supply of passport documents worth RM57.15mn to the Malaysian Immigration Department (MID). These contracts extend for an additional 12 months - longer than the previous contracts - commencing from 1st December 2024 to 30th November 2025. Under the terms of the LOEs, DTSB is also required to provide a performance bond totalling RM5.76mn to MOHA.

All Within Expectation Except for the Absence of Passport Chips LOE

We view these contracts awards positively, as they highlight Dsonic's vital role as the nation's exclusive provider of passport solutions. While the absence of an LOE for the supply of passport chips- typically awarded concurrently-was noted, we remain confident that Dsonic will secure this contract soon, supported by the company's exemplary track record, longstanding relationship with key government agencies, and its reputation for consistently delivering high-quality, secure solutions that align with the national requirements.

Earnings Impact on Datasonic

These contracts are expected to boost Dsonic's orderbook to approximately RM250mn. However, as these extensions were already incorporated into our projections, our earnings forecast remains unchanged. We maintain our BUY rating on Dsonic with a target price of RM0.63, based on 17x PER (average 3-year historical forward PER) applied to FY25F EPS of 3.7sen.

Source: BIMB Research - 21 Jan 2025