This article first appeared in The Edge Malaysia Weekly on December 9, 2024 - December 15, 2024
THE Home Ministry is believed to have awarded Datasonic Group Bhd (KL:DSONIC) a new five-year contract for the supply of Malaysian passports. This is the first contract renewal since November 2021, when the original contracts expired.
According to sources privy to the development, the contract requires Datasonic to supply materials required for three million Malaysian passports annually for five years.
The fee that the company will receive for supplying the travel documents has not been disclosed but, according to sources, it could range from RM100 to RM115 per copy.
Assuming RM100 per document, Datasonic stands to earn RM300 million a year for the supply of three million passports.
Based on past contracts, Datasonic was paid roughly RM69.33 per document. If the new contract pays the company RM100 per copy, it would represent a 44% increase.
“Judging from the price that the Home Ministry is said to be paying Datasonic for the Malaysian passports, it seems to suggest that the group is going to be supplying the entire booklet, including the chips and polycarbonate biodata pages,” says one of the sources.
It is also not known whether Datasonic is required to supply any other items or services under the new contract.
At press time, Datasonic had yet to reply to queries from The Edge.
After the previous contract expired in November 2021, Datasonic was granted a 24-month extension, starting from Dec 1, 2021, to continue supplying booklets, chips and polycarbonate biodata pages. There was no change to the item value, quantity and contract value for each contract. When the extensions were awarded in November 2021, the remaining value of the three contracts was estimated at RM280 million.
For context, on Dec 15, 2015, Datasonic’s subsidiary Datasonic Technologies Sdn Bhd (DTSB) was awarded a contract to supply Malaysian passport chips for a period of five years, or 12.5 million chips, from Dec 1, 2016, to Nov 30, 2021, for a contract sum of RM318.75 million.
Four months later, on April 27, 2016, DTSB was awarded a RM223.38 million contract for the supply of 13.42 million passport booklets for five years until Nov 30, 2021.
In April 2018, DTSB was also given a RM270.7 million contract for the supply of 9.96 million polycarbonate biodata pages for 46 months from Feb 1, 2018, to Nov 30, 2021.
According to the sources, the new contract has been held back for more than three years partly because the government was contemplating awarding the contract to a new party instead of Datasonic.
Sources say Percetakan Keselamatan Nasional Sdn Bhd (PKN), which is the manufacturing arm of Kumpulan FIMA Bhd (KL:KFIMA) and printed Malaysian passports in the past, is keen to secure the contract by partnering with German company Muhlbauer. PKN is still in the business of producing security documents.
“There was actually a possibility prior to the latest development that the government would award the contract to PKN-Muhlbauer instead of Datasonic. It is not easy to transfer the contract right away, though,” says one of the sources.
Industry insiders say it takes 15 months to transfer the operation from one supplier to another. Meanwhile, awarding the contract to PKN-Muhlbauer exposes national identification data to a foreign entity.
Before Datasonic was awarded the passport supply contracts in 2015, IRIS Corp Bhd (KL:IRIS) was the supplier, as it developed the world’s first smart passport with embedded chips.
IRIS is currently caught up, however, with the termination of the RM1.16 billion contract for the development of the National Integrated Immigration System (NIISe).
On Nov 24, 2023, IRIS filed a Notice of Arbitration under the Asian International Arbitration Centre (AIAC) Arbitration Rules 2023 to refer the disputes with the Home Ministry arising from and in connection with the NIISe contract to the AIAC for arbitration.
“There isn’t really another viable option for the government to award the new contract to,” says one of the sources.
If the new passport supply contract materialises, it will boost Datasonic’s outstanding order book of roughly RM100 million.
About a week ago, Datasonic received an extension on the contract, which is worth RM21.39 million, to maintain card personalisation centres at the National Registration Department (NRD) for the period of Dec 1, 2024, to Nov 30, 2025. This was the fourth extension to the contract, which Datasonic was awarded in 2013.
On the same day, the company was also awarded a contract extension for the supply of MyKad, MyTentera and MyPOCA raw cards and consumables to the NRD, for a period of 12 months between Dec 1, 2024, and Nov 30, 2025, for an additional contract value of RM59.85 million.
Datasonic has been producing MyKad for the NRD since 2011.
In view of the latest extensions, RHB Research in a Dec 3 report says it expects that Datasonic’s contract for passport-related solutions will also be extended in the near future.
“The current share price overhang from the absence of contract extensions for both its MyKad and passport-related solutions should ease once the extensions are secured,” says RHB Research.
In a Dec 3 note, BIMB Securities says it is confident that Datasonic will secure contract extensions for the supply of passports, owing to its established role as the key supplier for the documents.
Datasonic was trading at 40.5 sen on Dec 12, or 11.38 times its 12-month trailing price-earnings ratio.
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