KUALA LUMPUR (July 15): Datasonic Group Bhd (KL:DSONIC) shares traded higher this morning following the Home Ministry's announcement to extend the validity of Malaysian international passports to 10 years, up from the current five years.
Datasonic has been the sole provider of passport solutions to the Immigration Department since 2016 and the exclusive supplier of MyKads to the National Registration Department since 2012.
As of 10.05am, Datasonic added one sen or 1.92% to 53 sen, with 2,038,300 shares traded.
RHB Bank Bhd said Datasonic's revenue and profitability are expected to surge over the next four to five years, driven by a potential increase in the average sales price (ASP).
However, the bank anticipates that volume will decline by more than half from 2030 before normalising in 2035.
"The policy change may have raised the barrier to entry and could result in longer-term contracts," the bank stated in a research note Monday.
The bank added that the implementation date for the extension has yet to be decided and will be announced later.
RHB Bank suggested that if the 10-year validity option becomes available in 2025, most Malaysians would likely choose it despite the higher cost, given the cheaper cost per year and the convenience of fewer renewals.
"This should result in higher revenue and profitability for Datasonic in the next four to five years, assuming a higher ASP for the supply of passport booklets with extra pages.
"However, we also expect costs to rise due to increased complexity and machinery wear and tear," it said.
Nonetheless, RHB Bank said a change in government policy could disrupt Datasonic's earnings stability from 2030 to 2034 if it remains the passport solutions vendor.
"However, this could deter potential competitors due to the high capital expenditure requirement and increased risk during the transition period.
"As such, diversification of its business exposure will be essential to cushion its profitability from 2030," it added.
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