Dicker Data Limited

 

DDR Details
 
Better than Expected 9MFY19 Performance: Dicker Data Limited (ASX: DDR) is involved in wholesale distribution of computer hardware, software and related products. On 08 November 2019, DDR announced its collaboration with Check Point (NASDAQ: CHKP), a multinational company and provider of software and combined hardware and software products for IT security. DDR has been appointed as CHKP’s newest distributor for the Australian market.
 
9M Operating Highlights for FY19 for the year ended 30 September 2019: DDR announced its nine months operating highlights for FY19 wherein, the company reported revenue at $1,289.1 million, an increase of 17.8% from the comparative period last year. DDR’s top-line growth was aided by the decent performance across all the vendor partnerships and realizing full value for new vendors. On YTD basis, DDR witnessed a decent growth in its subscription segment, which came in better than other operating segments. The company reported operating profit before tax at $47.4 million as compared to $34.2 million in the previous corresponding period. DDR reported its net profit margin for nine months of FY19 at 3.7%.
 

9MFY19 Financial Highlights (Source: Company Reports)
 
DDR has distributed a fully franked dividend of AUD 0.0500 for each ordinary share held. The stock has an annual dividend yield of 3.26% at the current market price of $6.770.
 Outlook: As per the Management guidance, operating profit before tax for the company is likely to come in more than $60 million for FY19. The company is expecting a marginal increase in costs on account of increased headcount investment, which is expected to continue into Q4FY19 to support new vendor additions and future growth.
 
Stock Recommendation: The stock of DDR is quoting at $6.770 with a market capitalization of ~$1.06 billion. Currently, the stock is trading towards the upper band of its 52-week trading range of $2.78 to $8.090. The stock has given returns of 15.26% and 52.44% in the last three-months and six-months, respectively. Strategic relationship with CHKP will enable DDR to reach a much broader market particularly, in the specialized mid-market, regional resellers, MSSP and cloud, where the company is seeing the highest growth. DDR is likely to bring the most innovative and effective security solutions to meet security needs at every level. The stock has generated a return of 131.34% in the last one year. Considering the aforesaid facts coupled with recent price movement, and business prospects, we have a wait and watch stance on the stock at the current market price of $6.770, up 3.044% on account of strategic collaboration with Check Point as on 08 November 2019.

 
DDR Daily Technical Chart (Source: Thomson Reuters)
 

National Storage REIT

NSR Details
Cash Outflow of $100 million on Account of Acquisition Pipeline: National Storage REIT (ASX: NSR) is a fully integrated company, operating across self-storage centres. The company also manages and provides tailoring storage solutions to its clients across Australia and New Zealand.
 
FY19 Operating Highlights for the year ended 30 June 2019: NSR announced its FY19 financial results wherein, the company reported total revenue at $139.4 million, up 13% on y-o-y basis, aided by strong contribution from ancillary revenue, fees and other income sources. NSR reported a yoy growth of 21.4% in underlying earnings at $62.4 million. Operating profit at $89.7 million, during FY19, posted a growth of 17% on y-o-y basis. Weighted average Primary cap rate came in at 6.85% as compared to 7.30% in FY18. Investment properties increased to $1,949 million from $1,431 million in FY18, depicting a growth of 36% on y-o-y basis. During the year, the company made 39 acquisitions for a total value of over $400 million. Cash Balance as on 30 June 2019 stood at $178.8 million. Assets under management during FY19 stood at $1,949 million, which includes $1,702 million from Australia and $258 million from New Zealand.


FY19 Income Statement Highlights (Source: Company Reports)

The company Successfully completed $175 million of equity raising in August 2018 plus $170m in June 2019. NSR distributed an unfranked dividend of AUD 0.05100 for each ordinary share held. The stock has an annual dividend yield of ~5.04% at the current market price of $1.890.

FY20 Outlook: As per the Management guidance, the company is likely to deliver underlying earnings growth of higher than $78 million. Underlying EPS is likely to come in higher than 4%. For the remaining FY20, the company stated that the acquisition pipeline remains strong at more than $100 million.

Valuation Methodologies:
Method 1: Price to Earnings Multiple Approach:

PE Based Valuation (Source: Thomson Reuters), *NTM-Next Twelve Months

Method 2: Price to Cash Flow based Approach:

Price to Cashflow Based Valuation (Source: Thomson Reuters), *NTM-Next Twelve Months

Note: All forecasted figures and peers have been taken from Thomson Reuters, *NTM-Next Twelve Months

Stock Recommendation: The stock of NSR is trading at $1.890 with a market capitalization of ~$1.5 billion. The stock is trading close to the upper band of its 52-week trading range of $1.625 to $1.915. The stock has delivered returns of 15.45% and 9.80% during the last three-months and six-months, respectively. The business is looking for a cash outflow of more than $100 million in the next financial year. Hence, considering the aforesaid fact, valuations, and current trading levels, we suggest investors to book profit and recommend a “Sell” rating on the stock at the current market price of $1.890, down 0.787% as on 08 November 2019. 
 
 
NSR Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.