This article first appeared in The Edge Malaysia Weekly on August 2, 2021 - August 8, 2021

DATASONIC Group Bhd is believed to be the front runner for the MyKad replacement contract worth about RM350 million. Iris Corp Bhd stands in its way, however, as it is said to have also put in a bid.

Sources with knowledge of the contract say Datasonic is the front runner because of its expertise in the production of trusted identity documents such as the MyKad, which it has produced since 2011.

“Datasonic is rumoured to have landed the MyKad replacement contract. It should be announced soon,” a source tells The Edge.

In May 2016, Datasonic was awarded a 3½-year contract worth RM260.4 million for the supply of 12 million raw MyKads and MyKad consumables to the National Registration Department. The contract was to run from July 1, 2016, to Dec 31, 2019.

In January last year, it received an extension contract to supply 6.1 million raw MyKads over a one-year period.

Based on the value of the 2016 contract, the cost of each new MyKad is around RM20. The replacement MyKads may come with more security features, making it harder for crime syndicates to produce fake cards.

The contract value could also be higher than that in 2016, as it is a replacement contract rather than a supply contract for raw and consumable MyKads. This means that all MyKads may need to be replaced by entirely new cards.

“The government is developing a National Digital Identity project. So, the MyKads too should be able to store all the digital information and be integrated with the National Digital Identity system,” another source tells The Edge.

The National Digital Identity is an advanced method of authenticating a user’s identity online, whereby it is safe, secure and protected. It is not a substitute for the National Registration Identity Card, or MyKad, though, nor will it be compulsory for everyone.

Both Datasonic and Iris have shown that they can produce trusted documents. In June, Iris secured an extension of contract for the supply and production of three million national identity and voter cards for the government of Senegal.

Iris has also been awarded a RM1.09 billion contract by the Ministry of Home Affairs for the National Integrated Immigration System (NIISe) project. Last September, it secured a US$27.54 million contract to procure 15 million International Civil Aviation Organization-compliant electronic contactless inlays, along with its operating system, for India.

When contacted by The Edge, Datasonic managing director Wan Zalizan Wan Jusoh declined to comment on talk that his company was the front runner for the MyKad replacement contract, but said: “I believe Datasonic will be the trusted contractor of the government to continue with the launch of the new MyKad.” Previously, he had disclosed that the group had been working with the government to come up with new designs with enhanced security features and chip capabilities.

Apart from Datasonic and Iris, Percetakan Nasional Malaysia Bhd — owned by tycoon Tan Sri Syed Mokhtar Albukhary — also has the capability to produce trusted identity documents such as the MyKad.

Datasonic closed at 46 sen last Friday, valuing the group at RM1.35 billion. Lee Meng Horng, an analyst with RHB Research, has assigned a “buy” call on the counter, with a target price of 57 sen.

In June, Datasonic was awarded a RM39.8 million contract by the Ministry of Home Affairs for the provision of comprehensive maintenance services of card personalisation centres at the National Registration Department for 24 months, increasing the group’s outstanding order book to RM450 million.

“This contract win is yet another extension (June 1, 2021, to May 31, 2023) secured via open tender, demonstrating the proven track record and established technical capabilities of the incumbent,” Lee says in a June 3 report.

The 57 sen target price is based on a 25 times FY2022F price-earnings ratio ascribed by Lee, who has kept his “buy” call on Datasonic on expectation of a V-shaped earnings recovery on pent-up demand for passports upon the rollout of vaccines and eventual easing of international border restrictions, and supported by the RM450 million outstanding order book.

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