KUALA LUMPUR: RHB Research has raised the earnings forecasts for Datasonic Group Bhd for the financial years 2024 to 2026 (FY24-FY26) 0.5 per cent, 26.1 per cent and 49 per cent respectively following RM175 million contract extensions from the Home Ministry (KDN).
The contracts are for national identity card services, maintenance, and e-Passports solutions.
According to RHB research's note today, the earnings estimates were raised considering the new developments and adjusted volume assumptions accordingly.
"We expect sentiment on the stock to improve following the contract extensions, which ensure earnings sustainability, and remain hopeful for more contract wins to further boost the orderbook," it said.
The investment bank said the contract extensions are aligned with expectations, and the positive price adjustment comes as a pleasant surprise, likely alleviating some concerns impacting the share price.
"Although the extension period is short, authorities are currently reviewing proposals for more extended contract durations," it added.
RHB research noted that the government's ongoing assessment of enhanced passport solutions and new printing systems is the reason for the six-month extension of the current contract.
RHB research reaffirmed its 'Buy' recommendation for Datasonic while increasing the target price from RM0.57 to RM0.63.