RHB maintains 'buy' on Datasonic, TP at RM1.96

  • Analyst Reports
  • Monday, 03 Feb 2020

KUALA LUMPUR: Datasonic Group Bhd's new arrangement with the government is a win-win solution for both parties as it will recalibrate the quantity of chip supply while leaving the total contract sum unchanged, says RHB research.

To recap, Datasonic received additional scope of work under the existing Malaysian passport chip supply contract from the Home Ministry.

Under the contract, the group will undertake maintenance services for the hardware and software of auto gate and chips, equipment and applicaiton of public key infrastructure and public key directory at a value of RM38.25mil.

Meanwhile, the the quantity of passport chips will be reduced from 12.5 million to 11 million amounting to RM280.5mil, which will leave the total contract sum unchanged at RM318.75mil.

"Instead of going through a long process and commit to an additional contract to these works, the Government is able to generate savings by recalibrating the quantity of chip supply based on the current burn rate of c.2m pa and outstanding quantity of c.6.3m units.

"On the other hand, this will contribute positively to the earnings of Datasonic with an additional revenue of MYR15m pa," said RHB.

It added that the company is able to recognise unbilled revenue retrospectively from May 2019, in which most of the costs have been expensed.

The research house said its forecasts are unchanged as the additional scope of work is within its expectations.

It maintained a buy call on the stock with a target price of RM1.96.

Moving forward, RHB believes the higher barrier of entry on solutions related to national security will give Datasonic a good chance of clinching a new contract to supply auto gate solutions at Bangunan Sultan Iskandar in Johor.

Following that, the Foreign Visa System is expected in February while the National Integrated Immigration System will close its tender period on March 4.
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