This article first appeared in The Edge Malaysia Weekly on October 1, 2018 - October 7, 2018

AN upcoming contract valued at about RM300 million by the government to supply raw identification cards to the National Registration Department could see a two-horse race between Datasonic Group Bhd and Iris Corp Bhd, industry sources say.

While there may be foreign companies participating in the tender, it is understood that the national security aspect would lead to the contract being awarded to a Malaysian outfit.

The tender should be called soon, with the current contract held by Datasonic expiring at end-December next year.

Back in May 2016, Datasonic announced that it had accepted a letter of award with a contact value of RM260.4 million to supply 12 million MyKad raw cards and MyKad consumables starting July 2016 to December 2019.

This would indicate that a contract may be awarded by the third quarter of next year or early in the fourth quarter.

“From what we know, Iris has already been called in to meet JPN (Jabatan Pendaftaran Negara or National Registration Department) to exhibit its capability,” a source familiar with the matter tells The Edge.

However, when contacted, Iris CEO Shaiful Subhan declined to comment. Some of the company’s substantial shareholders also declined to comment.

It is understood that the contract is attracting considerable interest as its margins are quite high — in the region of 20% — which would augur well for the likes of Iris.

For the first three months of its financial year ending March 2019, Iris registered a net profit of RM8.68 million on revenue of RM75.81 million. Compared with the corresponding period a year ago, net profit was up 66.60% despite turnover declining by almost 25%.

Nevertheless, to put things into perspective, Iris suffered losses over the last four financial years, and had accumulated losses amounting to RM318.67 million.

As at end-June this year, Iris had short-term deposits of RM58.57 million and cash and bank balances of RM37.14 million. Its long-term borrowings amounted to RM129.19 million while short-term debt commitments were RM44.25 million.

Iris is an established player in trusted identification systems and cards, and has a significant international presence spanning more than 32 countries. The company has been hiving off non-core businesses, such as its education and mining operations, to focus on identification cards and the like.

On its prospects, Iris says it expects to derive revenue from ongoing trusted identification projects in Africa, Asia, Asia-Pacific and North America, and adds that “the management of Iris is positive about the group’s prospects and expects continued growth of Iris’ business operations and financial performance”.

Meanwhile, Datasonic — via its wholly-owned Datasonic Technologies Sdn Bhd — currently has the contract for the supply of identity cards to the government.

For its first quarter ended June 30, Datasonic chalked up a net profit of RM7.39 million on revenue of RM48.78 million. Compared with the corresponding period a year ago, net profit fell 51% while revenue declined 18.83%.

On its prospects, it says its order book was at RM885 million as at June, and “the prospects for growth are expected to be satisfactory in the financial year ending March 31, 2019”.

As at end-June, Datasonic had cash and bank balances of RM11.80 million and deposits with licensed banks of RM6.40 million while long-term and short-term debts were RM87.75 million and RM52.46 million respectively.

Certain quarters say the contract has a requirement that the winning bid be that from a wholly-owned bumiputera company. This, however, remains unsubstantiated and seems unlikely considering Datasonic is a publicly traded company.

Datasonic’s substantial shareholders include its managing director Datuk Hanifah Noordin, who has a 28.38% stake, deputy managing director Chew Ben Ben (25.67%) and Lembaga Tabung Haji (9.49%).

Iris’ substantial shareholders are Datuk Paul Poh Yang Hong with a 15.70% stake, the Federal Land Development Authority (14.60%), Datuk Rozabil @ Rozamujib Abdul Rahman (10.78%) and Datuk Robin Tan Yeong Ching, the son of tycoon Tan Sri Vincent Tan Chee Yioun (8.33%).

Iris and Datasonic have been competing with each other for some time now. While Iris was a pioneer in the business and made the world’s first electronic passport as well as secured the contract for the implementation of the MyKad in 2001, the company ventured into new businesses and lost its focus.

Iris ended trading last Friday at 14.5 sen, giving it a market capitalisation of RM430.1 million, while Datasonic closed last Friday at 72 sen, translating into a market capitalisation of RM972 million.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.