Datasonic has secured an RM31.39 million additional contract from the Home Affairs Ministry raising the overall value of the contract to RM350 million. The latest addition has given analysts from MIDF a somewhat expected view on the share price, giving the stock an unchanged target price and maintaining a buy call.
The amendment on the contract is for the supply of the Malaysian Passport Chips or 12.5m of Passport Chips commencing from December 2021 to 30th November 2023. The initial contract was worth RM318.75m, and the revisions will now raise the overall contract ceiling value by RM31.39m to RM350.14m.
The modification in the contract ceiling value is projected to contribute to the group’s future earnings and net assets per share from FY23 onwards throughout the term of the contract. The amendment contract includes maintenance services for equipment, software, and system applications for public key infrastructure and public key development in 2022 and 2023. It also includes maintenance services for equipment, software, and e-gates, as well as maintenance services for equipment, software, and chip system applications for local and overseas. Datasonic is required to furnish a performance bond for the amount of RM3.18m to KDN with the validity period extended until 30th November 2024.
The earnings outlook is expected to underpin by pent-up demand for passport-related solutions as borders gradually reopen, with new contracts for the soon-to-be-rolled-out MyKad new generations and national digital ID on the strength of its ready technology.
Maintain BUY with unchanged TP of RM0.57. MIDF remains positive about Dsonic’s outlook due to the Group’s commitment to stay ahead of security technology which makes the Group much more appealing than its peers to continuously be selected as the national ID security-related solutions vendor. Hence, it maintains a BUY call on Dsonic with an unchanged target price of RM0.57 per share by pegging its FY23F core EPS of 2.94sen to the Group’s 5-year mean PER of 19.5x.
