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KUALA LUMPUR (Jan 15): RHB Retail Research maintained its 'buy' call on Datasonic Group Bhd at RM1.47, raising its target price (TP) by 61.98% to RM1.96 from RM1.21.

RHB Research's stance is sustained by a 33% upside determined by the updated TP and a circa 2% yield.

In a company update today, RHB Retail Research analyst Lee Meng Horng predicted that Datasonic's FY21-22 bottomline could potentially rise by 143% and 140%, propelled by the Foreign Visa System (VLN) contract which is deemed to yield Datasonic an ongoing revenue stream of RM463 million.

"This in turn could hypothetically translate to RM1.44/share at a conservative 20x P/E (20 times price to earnings).

"We believe the securing of a major contract in the software/system space could further re-rate the company in this segment, rather than just hardware and equipment," he added.

The research house believes that the change of guard and shareholders within Datasonic will further reinvigorate the company.

Currently, deputy chairman Datuk Razali Mohd Yusof has emerged as the substantial shareholder, and recent off-market trades saw existing managing director (MD) Datuk Abu Hanifah Noordin ceased being a substantial shareholder after disposing of 28.15% from his entire 28.82% stake to the new MD (8.86%), deputy MD Chew Ben Ben (9.38%) and undisclosed holders (4.95% and 4.96%).

Datasonic is likely to clinch contracts to supply MyKads and consumables for another year. Additionally, the company is further expecting the award of public key directory and public key infrastructure related solutions alongside auto-gate maintenance.

Lee noted that Datasonic has undertook maintenance related works for over a year, and will realise revenue of circa RM15 million upon attainment of the contract.

"Maintain Buy with no changes in earnings forecasts given the growing expectations and optimism on several potential contract flows in the near term and the recent change of guard in the company. Failure in the contract bid should see our TP revert to the level prior to this upgrade.

"Key downside risks include fluctuations in orders, contract discontinuation, and unsuccessful contract bids," he said.

As at 2.50pm, Datasonic was trading at RM1.59, with some 132,100 shares changing hands, valuing the company at RM2.15 billion.

http://www.theedgemarkets.com/article/rhb-research-keeps-buy-rating-datasonic


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