The resumption of MyKad and consumables supply, coupled with strong demand for passport-related solutions propelled Datasonic Group (DSON)’s core earnings to a multi-year high of RM75.7 million, which came in line.
The company’s ability to secure any contract extension on its existing solutions should lift the current share-price overhang. Also, its current below-mean valuation presents a good buying opportunity, said RHB Research (RHB) in the recent Malaysia Results Review Report.
“Financial year 2023 revenue and core profit of RM344.7 million and RM75.7 million accounted for 94.3% and 95.4% of our and consensus full-year forecasts, broadly in line,” said RHB.
A fourth interim dividend per share of 0.75 sen was declared, bringing year-to-date dividend per share to 2 sen. Quarter four financial year 2023 revenue of RM104.9 million translated to a core profit of RM22.3 million, supported by stronger orders for its various solutions.
Effective supply chain planning and execution allowed DSON to ensure sufficient supplies meeting the demand for the national security documents during the quarter where the passport chips and booklet deliveries were at 850k while polycarbonate data pages were up sequentially at 870k.
There was 582k MyKad consumables delivery and 611k for raw card & chips. Meanwhile, contributions from other contracts/orders such as bank card personalisation and recognition from the various security documents and maintenance service were stable.
Outstanding orderbook is estimated at RM339 million. Management is actively pursuing various contract renewals, inclusive of various maintenance contracts, the supply of MyKad in which the delivery of cards may take place till Aug 2023 as well as further extension to the its passport-related solutions beyond 30 Nov 2023 to ensure the continuity of supply for critical national security documents.
Besides, management is also still actively pursuing new programmes and initiatives to further boost its orderbook, such as digital identification cards and the identity management system under the memorandum of agreement or MoA with the Ministry of Urban Planning, Housing and Territorial Development of the Republic of Guinea.
“We kept our forecasts as the results were in line. Our trading price inches up slightly to RM0.57 as we roll forward our valuation base year to financial year 24 future (Mar), based on unchanged an 20x price-earnings ratio, inclusive of a 2% environmental, social, governance (ESG) premium given the increase in its ESG score to 3.1 from 3.0,” said RHB.
Key downside risks identified by RHB include higher input costs, weakerthan-expected orders, and non-renewals of contracts.
