PETALING JAYA: Datasonic Group Bhd
’s latest contract extension for passport-related work from the Home Ministry (KDN) has reaffirmed the group’s strength in the supply of e-passport solutions, analysts say.
According to RHB Research, the contract extensions were within its expectations and a testament to the group’s ability to deliver over the past decade in various mission-critical projects.
Datasonic received the extension from KDN for the supply of Malaysian passports and polycarbonate biodata pages for an additional third ceiling-contract value of RM150.5mil. The extension is from Dec 1, 2024 to Nov 3, 2025.
“We understand the proposals for an improved version of such passport solutions and new printing systems are still being evaluated,” added RHB Research.
Separately, Datasonic also won the contract for comprehensive maintenance services for facial live-capture imaging systems from the ministry.
The RM6.4mil contract, includes equipment, software and applications at all Immigration Department of Malaysia issuing and receiving offices for a period of 36 months commencing Feb 25, 2025 to Feb 24, 2028.
“This contract win is within our order replenishment assumptions,” RHB Research said.
Following the contract extensions, the research house firm said the group’s current order book is in excess of RM260mil.
“The group’s management also remains committed towards exploring more overseas projects, given Datasonic’s cost competitiveness and the quality of its security documents.
“Locally, more autogate and IT-related jobs are being targeted,” said RHB Research.
Meanwhile, the group’s earnings outlook remains healthy, on the back of sustained strong demand for its various government-related solutions and margin expansion stemming from adjustments to its prices, the research house added
Hence, the current share price overhang from the absence of long-term contract extensions for both of Datasonic’s MyKad and passport-related solutions should ease with yet another contract extension being secured, RHB Research said.
“We maintain our forecasts as the contract wins are within our expectations.
“However, our target price is lowered to 61 sen as we roll forward our valuation base year to 2026 at an unchanged 20 times price-earnings ratio at the five-year mean,” the research house said, adding that it likes Datasonic for its competitive strength in its niche solutions, healthy yields, strong cash flow generation and potential upside from new project wins at attractive valuations.
However, key downside risks include higher input costs, weaker-than-expected orders, non-renewal of contracts and changes in government policy.
BIMB Securities Research in a note to clients said: “We view these contract awards positively as they affirm Datasonic’s expertise in the passport-solutions domain.”
However, the research house said it noticed the absence of a letter of extension for the supply of passport chips, which is typically awarded alongside the extensions.
“Nonetheless, given Datasonic’s established track record, we anticipate it to be secured in due course,” the research house added.
The research house, which made no changes to its projections ofr Datasonic, said it maintained a “buy” call on the stock with a target price of 63 sen per share.
