SHARES in Datasonic Group Bhd, one of the top performing stocks on Bursa Malaysia this year, took a sharp beating after a news report yesterday suggested that the counter’s unexplained meteoric rise could attract stricter enforcement by the exchange.
But that has not stopped the IT company from making a bid to grow its business.
Datasonic is said to be eyeing Percetakan Nasional Malaysia Bhd (PNMB) from the Government.
Sources say Datasonic has yet to submit a formal offer, but has already indicated its interest to the Government. An acquisition is seen to be a perfect fit to the company’s core business as manufacturer and supplier of security cards.
PNMB has a contract to supply identification cards to the Home Ministry and the Royal Malaysian Customs Department.
It is believed that a joint venture between pension fund Kumpulan Wang Persaraan (KWAP) and a company linked to Tan Sri Syed Mokhtar Al-Bukhary has already submitted a bid to acquire PNMB.
It is unclear, however, whether the Government is ready to sell PNMB.
The company, which is wholly owned by the Ministry of Finance Inc was previously identified as one of the potential companies to be listed on Bursa Malaysia. Traders said the company was eyeing bigger and more lucrative projects.
As Datasonic plots its growth strategy, investors have become increasingly nervous over the meteoric rise in the company’s share price since its listing.
Shares in Datasonic plunged 22.6% to close at RM3.64 and hitting an intra-day low of RM3.30 in the morning session, which was its maximum daily downside limit.
As of yesterday, no trading curbs have been imposed on Datasonic’s shares or call warrants, Datasonic says in an email to StarBizWeek.
“The trading of Datasonic securities has not been declared as designated securities,’’ it adds.
The massive one-day sell-down yesterday reduced the company’s market value by RM715mil to RM2.46bil.
Despite the drop, the stock was still up 66% year-to-date.
Datasonic sold its stocks to the public at RM2 a piece in September 2012 to raise RM40.75mil. It had since completed two bonus issue exercises and a share split.
For an investor who bought the stock at its IPO price, the cost per share is 26.7 sen. Few would have dared to dream the stock will increase in value by more than a 1000% over such a short period.
While some might cheer, others will not. One of them was the regulator of the stock market which felt it was time for reality check.
Bursa Malaysia on Tuesday warned investors to trade shares in Datasonic with caution after the stock surged to an all-time high of RM4.85.
This came about after the company said on Feb 18 that it was unaware of any corporate development to explain its the unusual share price movement.
The absence of material price moving development meant the stock was vulnerable to speculation as its share price continued to shoot up.
Strong interest from retailers prompted Ambank Malaysia Bhd to issue a call warrant on Datasonic with a hefty conversion ratio of six call warrants for one Datasonic share.
The call warrants, which will expire on Jan 12, 2015, has an exercise price of RM3.72.
So is Datasonic really worth that much?
In a recent report, RHB Research Institute valued the stock at RM4.08 after the company secured its first passport project for foreign customers.
Datasonic is already the main supplier of raw indentification cards to the National Registration Department.
According to a data compiled by Bloomberg, earnings will increase from RM81.9mil in the year ended Dec 31, 2013 (FY13) to RM98mil in FY14 and to expand further to RM110mil in FY15.
Earnings per share was forecast at 14 sen in FY14 and 16 sen in FY15. This valued the stock, after the sharp decline yesterday, at 26 times its projected forward earnings.
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