RHB maintains 'buy' on Datasonic

KUALA LUMPUR: RHB Research believes Datasonic Group Bhd's existing orderbook should continue to provide earnings support following the group's unsuccessful bid for the National Integrated Immigration System (NIISe).

It said it expects a knee-jerk reaction but strong earnings recovery should kick in once borders are reopened and further upside could stem from other project bids.

"Despite the disappointment results of this project bid, management remains confident of securing the Foreigner Identity Card or i-Kad solutions contract, owing to Datasonic’s expertise in smart card solutions.

"Also, we understand that the i-Kad solutions can be further extended to door access systems, facial recognition, and remittance-related solutions, if the Government looks to tighten security by mandating the i-Kad as a compulsory legal document for foreign workers," said RHB.

Other major upcoming projects are the National Digital ID or e-KYC, and Electronic Medical Records or EMR.

RHB said it expects an extension or new versio of the MyKad to be awarded in the near term.

The MyKad contract had expired in December 2020 with the oustanding order of 4.1 million yet to be delivered due to Covid019, in addition ot the consistency in quality.

The research house has maintained its forecasts on Datasonic but reduced the target price to 62 sen after removing the hypothetical value of 36 sen per share for the NIISe from its valuation.

"We think a strong earnings recovery should kick in once the borders are reopened, as passports have expiry dates, and backed by its outstanding orderbook of >MYR500m," it said.
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