Dicker Data Limited

DDR Details
 
Equity Raining to Support Future Growth Objectives: Dicker Data Limited (ASX: DDR) is a specialist IT hardware distributor of various prominent brands. The market capitalisation of the company stood at $1.21 billion as on 13^th May 2020. The company recently announced that it has successfully completed a fully underwritten institutional placement and raised around $50 million. The company would also raise further $5 million via offering a share purchase plan. The proceeds raised from the equity raising will be used to underpin the long-term growth objectives of DDR. Dicker Data will ensure that it remains well placed as a leading value-added technology distributor of Australia.

During Q1 FY20, the company reported total revenue and Net profit before tax amounting to $463.9 million and $18.4 million, reflecting a rise of 19.9% and 36.3% on pcp, respectively. 


Use of Proceeds (Source: Company Reports)

Key Priorities for FY20: During FY20, the company intends to accelerate the uptake of its Dicker Data Financial Services (DDFS) offerings in order to meet the increasing demand for as-a-Service solutions. With respect to Managed Service Providers, DDR would continue to work with its vendors to match the needs of these partners via the delivery of cloud, storage, infrastructure, migration, analytics and backup solutions which suit their cyclical billing arrangements.

Stock Recommendation: The stock of DDR is trading close to its 52-week high of $8.090. DDR has EV/EBITDA multiple of 17.0x as compared to the industry average (Technology) of 3.4x, on TTM basis. The stock of DDR is trading at a price to book value multiple of 12.2x as compared to the industry average (Technology) of 4.1x on TTM basis, indicating an overvalued juncture at current levels. It is to be noted that the ex-dividend date for 2020 interim dividend is 14th May 2020. Hence, considering the above-stated factors, we would wait for further catalysts to drive the growth and have a watch stance on the stock at the current market price of $7.190 per share, up by 0.559% on 13^th May 2020. 

 
DDR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
 

Dotz Nano Limited

DTZ Details
 
Inked New Commercial Agreement: Dotz Nano Limited (ASX: DTZ) is engaged in the development, manufacturing and commercialisation of graphene quantum dots. The market capitalisation of the company stood at $20.12 million as on 13^th May 2020. The company recently notified the market that it would conduct its Annual General Meeting on 10^th June 2020. DTZ has recently inked a US$1,000,000 commercial agreement with Hong Kong-based corporation “Universal Exports Group” for supplying its ValiDotz™ security markers. Under the terms of the agreement, UEG will purchase 100,000,000 of ValiDotz™ products. 

The initial order under the agreement is for 30 million masks with a follow-up order of up to 70 million masks. Over the term of the agreement, the company is expected to generate revenue amounting to A$1.53 million. This agreement is a result of strategic focus and efforts initiated by the Board and Management recently.

A Quick Look at Q1 FY20: During the quarter, the company witnessed a challenging operational environment because of COVID-19. The company has received a A$166,000 order from Color Plastic in Switzerland, for which the first instalment of 10% has already materialized.  The company has continued the development of new materials in order to improve its portfolio and customer offering. It ended the quarter with a cash balance of US$578,000.


Cash Flows (Source: Company Reports)

Future Aspects: The key priority of the company revolves around increasing sales activity and reaching profitability. The company is improving long-term commercial negotiations with prospective customers throughout the anti-counterfeiting, product liability and oil and gas segments.

Stock Recommendation: The current ratio of the company stood at 3.47x in FY19 as compared to the industry median of 2.14x. This reflects that the company is in a decent position to address its short-term obligations against the broader industry median. During one-year, the company witnessed decent improvement in its key margins. The stock of DTZ has provided decent returns of 30.77% and 28.30% within the time span of one month and three months, respectively. Therefore, considering the decent liquidity position, improvement in key margins and returns provided in past few months, we give a “Hold” recommendation on the stock at the current market price of $0.068 per share on 13^th May 2020.  

 
DTZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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