Dicker Data Limited

DDR Details

Strong Performance Across all Vendor Partnerships: Dicker Data Limited (ASX: DDR) is involved in the wholesale distribution of computer hardware and software.

Recent Updates:

Distribution Agreement with Honeywell: The company made an announcement regarding the distribution agreement executed with Honeywell across Australia and New Zealand. Under the agreement, Dicker Data Limited has received a complete access to the entire Automatic Identification and Data Capture (AIDC) range including industrial printers, enterprise mobility tablets, ruggedized scanners and their industry leading Mobility Edge platform. Through the aforesaid agreement, the company has gained access into the industrial scanner and printer market & considers it as a significant opportunity to capitalise on.

New Division Launch: In the month of June, the company announced the launch of Dicker Data Financial Services as the new business division to address the shift from capital expenditure to operational expenditure and to address the growing demand for Device-as-a-Service solutions & Infrastructure-as-a-Service solutions.

Appointment of Alternate Director: Christopher Aleksov was appointed as an Alternate Director to Fiona Brown, Non-Executive Director of the company.

Distribution Agreement with Kaspersky Lab: In May 2019, the company notified about another distribution agreement with Kaspersky Lab, for the distribution of Kaspersky’s complete range of products in the Australian and New Zealand market.
Q12019 Update: During the quarter ended 31 March 2019, the company generated revenue amounting to $386.9 million, up 21.1% in comparison to the prior corresponding period revenue of $319.6 million. Profit before tax for the quarter was reported at $13.5 million, up 46.7% on prior corresponding quarter profit of $9.2 million.

The increase in revenue was attributable to robust performance across all the vendor partnerships and full value realisation for new vendors. Profit before tax was ahead of the forecast for the quarter. PBT margin for the period also improved from 2.7% in the prior corresponding period to 3.5% in March 2019 quarter. The company also witnessed a significant increase in working capital investments throughout the quarter.

FY18 Highlights: During the year, the company generated revenue amounting to $1,493.6 million, up 14.4% on pcp. 18 new vendors added during FY17 reported for an incremental revenue of $66.4 million in FY18. Net profit after tax was reported at $32.5 million, representing an increase of 20.5% on pcp NPAT of $26.9 million. Earnings per share went up by 20.2% on the prior corresponding period. The company reported a top-line CAGR growth of 11.5% from the period FY15 to FY18. EBITDA CAGR growth over the same period was reported at 8.8%.


Financial Trends (Source: Company Reports)

FY19 Guidance: Based on the performance in the first quarter, the company issued FY19 pre-tax profit guidance of $51.4 million, maintaining its recent track record of 10% growth.

Stock Recommendation: Over a period of 1 year, the stock of the company generated returns of 155.67%. The stock is trading towards its 52-week high level of $7.850. The company’s success has been driven by leveraging its in-house expertise and by extending highly differentiated solutions in the market. This is evident in the newly launched financial solution, Dicker Data Financial Services. During the first quarter of FY19, the company witnessed a rise in the revenue and profits along with an improvement in PBT margin. In addition, the distribution agreements executed with Honeywell and Kaspersky also helped the company to expand to new markets for further growth. The company has an EV/EBITDA multiple of 21.6x, which is higher than the industry median of 6.9x. Considering the above factors, valuation, and current trading level, we are of the view that most of the positives are priced in at the current juncture. Hence, we advise investors to book profit at the current level and recommend a “Sell” rating on the stock at the current market price of $6.710, down 12.516% on 31 July 2019.


DDR Daily Chart (Source: Thomson Reuters)

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