PETALING JAYA: The delivery of Datasonic Group Bhd ’s first overseas e-passport contract worth RM20mil for a West African country should start towards the end of 2024, says MIDF Research.
While the management of Datasonic did not disclose the name of the country, MIDF Research said that it could be either Mali or Burkina Faso, premised on the guided population size of over 20 million.
It is noteworthy that the group secured the five-year e-passport contract in May for the supply of 500,000 units of passport chip, booklet and polycarbonate datapages.
“We are positive on this news, as this will serve as a reference for the neighbouring countries as well as other countries around the globe.
“A quick check on the Organisation for Economic Co-operation and Development indicated that West Africa currently has a population of around 446 million,” it said in a note.
Post-analyst briefing on Datasonic’s fourth-quarter results, MIDF Research upgraded its call to a “buy” from “neutral” previously with an unchanged target price of 53 sen.
“The combination of higher average selling prices, minimal depreciation and amortisation cost, continuous improvement in operational efficiency as well as anticipation of lower effective tax rate would serve as the group’s growth engine in the foreseeable future.
“On another note, given the recent share price weakness, we view that dividend yield has become attractive at more than 6%.”
Additionally, MIDF Research noted that the issuance of foreign worker cards, i-Kad, is expected to increase further to 150,000 per month, as compared to 100,000 per month previously.
As for the autogate business, the research house noted that Datasonic is expected to deploy another 40 autogates at the Kuala Lumpur International Airport (KLIA), bringing the total number to 98 in both KLIA and KLIA 2.
The group has also submitted a tender for additional 40 autogates at Bangunan Sultan Iskandar, Johor as well as autogate maintenance for the Malaysia Automated Clearance System for three years.
That being said, MIDF Research believes that future earnings growth is expected, in anticipation of higher revenue recognition and healthier profit margins.
Meanwhile, RHB Research said Datasonic is expected to sustain its strong earnings going into financial year 2025 (FY25), as it is known to be a preferred supplier for mission-critical projects, in addition to contributions from new projects.
RHB Research kept its “buy” call on the group at a higher target price of 68 sen per share.
The research house also raised its FY25 and FY26 earnings by 4.9% and 8.6%, respectively, after factoring in higher order book and margin assumptions on lower depreciation charges in the absence of new major capital expenditure.
“We raise our forecast on sturdier orderbook and margin assumptions and still like Datasonic for its healthy yields, strong cash flow generation, and potential upside from new project wins at below-mean valuation,” it added.
RHB Research shared its optimism on Datasonic’s contract renewal for identity card and passport solutions, which had previously ended on May 31, 2024.