Datasonic’s earnings to hit record high in 2017: RHB Research

PETALING JAYA: Datasonic Group Bhd is set to post record high earnings in 2017, helped by contract extensions and new jobs, said RHB Research.
The group is looking to secure RM800 million to RM1.0 billion worth of contract extensions and new jobs in 2016. This, coupled with its recent success in clinching a passport chips contract, is likely to propel its earnings to a new high in 2017.
RHB Research said MyKad renewal is forthcoming as the existing MyKad contract is set to expire by mid-2016. “Management is working on a potential renewal by proposing the national identification card’s next generation,” it noted.
RHB Research expects an official award by June with the imputation of 12 million units each for new MyKad and MyKad consumables contracts, to be delivered over a three-year tenure.
Based on an average selling price (ASP) of RM17.50 per MyKad and RM4.00 per MyKad consumable, the renewals could be worth RM250 million to RM260 million.
For its existing provision of data-pages for Malaysian passports, Datasonic has an outstanding order book of 3.2 million copies as at December 2015.
“With the remaining balance set to be fully exhausted by Q1 2017, the group is negotiating a five-year extension of 13 million to 13.5 million copies. We estimate that this potential extension is worth RM370 million to RM390 million, based on an existing ASP of RM28.40. We expect an official award to take place in 3Q16,” RHB Research noted.
To complete its national passport offerings, Datasonic is finalising its discussions with the government for the provision of the passport book. The official award is expected to take place by end-March.
“We believe the official commencement date is likely to coincide with its passport chip contract, ie on Dec 1 2016. Our checks with sources indicate that the contract would cover 13 million to 13.5 million copies to be procured over a five-year tenure at a total value of RM210 million to RM230 million,” RHB Research said.
Datasonic is also eyeing to roll out its security camera solutions in the Klang Valley after having installed close to 600 cameras in Penang for local municipalities.
“The management is looking to install 3,000 cameras and to set up surveillance centres for the municipalities involved. The contract could be worth RM100 million to RM120 million,” said the research house.
In addition, Datasonic intends to penetrate into other national security-related projects, possibly in neighbouring countries over the medium term.
RHB Research is maintaining a “buy” call on Datasonic with an unchanged target price of RM1.87. “As such, we continue to advise investors to accumulate the stock,” it said.
The research house expects Datasonic’s Q4 core earnings, to be released by end-May, to come within the expectations at RM11 million to RM13 million.
In a separate development, Datasonic announced in a filing with the stock exchange yesterday that the 1 sen second interim dividend for the financial year ended March 31, 2016 is payable on April 12. The ex-date and the entitlement date are March 29 and March 31, respectively.