INTER-Pacific Research today downgraded its call on Datasonic Group Bhd (DGB) to neutral from buy with a target price RM1.20, 17 sen lower than its earlier target price as it adjusted its assumptions on contract deliverables.
The research house said DGB posted a first quarter ended March 31, 2021 (1QFY21) net profit that was below its and street consensus of full year estimates at 5% and 6%, largely due to the impact of the Movement Control Order (MCO) on international travel and the flow-on effect to passport renewals.
DGB’s 1QFY21 revenue fell 32.4% year-on-year (y-o-y) from RM58.3 mil to RM39.4 mil, as a result of having supplied no passports to the Immigration Department during the MCO phase that was put into effect from March 18, 2020. The pandemic saw a fall in demand for international travel and citizens staving off renewals of passports.
According to the Inter-Pacific pre-MCO, management had guided recurring revenue contribution from e-passport sales to be approximately RM166 mil per annum or at a simple rate of RM44 mil on quarter, which has now fallen to zero, if not close to zero.
Contrary to passports, the research house expected deliveries on MyKads to continue despite restrictions on travel.
“1QFY21 MyKad deliveries amounted to one million units that we estimate to contribute RM22 mil to total sales as opposed to the fourth quarter of financial year 2020 (4QFY20) MyKad deliveries of 700,000 units at RM15 mil.”
“We lower our FY21F earnings estimate down sharply by 69% as we revise our sales forecast to incorporate lower deliverables of contracts most notably those relating to e-passports as virus fears may continue to mute demand but increase our earnings expectations for FY22F by 13% assuming an increase in passport deliveries due to backlog orders,” it said.
As at 12.27pm today, Datasonic Group share prices stood at RM1.31 with a market capital of RM1.77 bil.
