Technology

Dicker Data rises following ‘outstanding’ first quarter

Wed 11 May 22, 3:31pm (AEST)
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Key Points

  • Revenue at $673.6m was up 51%
  • Revenue split between A&NZ was $534.9m and $138.7m, respectively
  • $19.35m acquisition of Hills Security and IT (SIT) division was completed early May

After having watched its share price tumble from $14.80 late March to a low of $12.46 earlier this week, courtesy of the tough love dished out to IT sector globally, Dicker Data (ASX: DDR) experienced some welcomed relief today following its strong first quarter result.

The IT hardware distributor’s share price, up 2.16%, bucked the continued fall of the S&P/ASX All Technology Index, down -0.43% today, -14.51% for the month, and -30.08% lower year-to-date (2022).

Formerly Rodin Corporation, Dicker Data engages in the wholesale distribution of computer hardware, software, and related products in A&NZ, and sell products to around 8,200 resellers partners.

Highlights of the first quarter result included:

  • Revenue at $673.6m was up 51% on the previous period

  • Profit lifting 23% to $23.8m

  • Interim fully franked dividend of 13c payable June 1

  • Total proposed fully franked dividends to be paid in FY22 54c per share, up 44% from FY21 (100% of after-tax profits)

  • Existing and new vendor additions delivered $135.5m in incremental revenue

  • Operating expenses increased by 17.5%, finalising at 4.4% of revenue, down from 5.6% in the previous period

The company’s founder, David Dicker attributes the strong 1Q result to increased demand for virtual capabilities and accelerated digital transformation of businesses across A&NZ.

Due to $90.3m full quarter contribution from the recently acquired Exeed business, the revenue split between A&NZ was $534.9m and $138.7m, respectively.

Margins and growth

While Dicker declined to provide any specific financial guidance for 2022 earlier this year, today’s update alluded to higher margins.

Despite lower margins for the quarter at 8.6%, due to ongoing supply chain disruptions – notably the global semiconductor chip shortage, and the introduction of the retail business in NZ - Dicker expects to see margins finalising around 9% for the full year ending December 31.

"Our two recent acquisitions (Exeed and Hills Security and IT) are almost fully integrated into the business and I’m confident that we have the foundations in place to continue delivering the growth our shareholders have come to expect,” Dicker noted.

Acquisition

The $19.35m acquisition of Hills Security and IT (SIT) division, completed early May, advances the company’s entry into the security, access control and surveillance markets in FY22. Ultimately the company plan to leverage these security solutions with its extensive existing partner network in Australia.

Commenting on recent acquisitions, executive director Mary Stojcevski, noted:

“The Company continues to benefit from increased scale and leverage on its cost base following the integration of both the Exeed and Hills SIT businesses, with costs down as a percentage of revenue in Q1 2022 on the prior corresponding period.”

“With the Hills SIT acquisition completed and now fully integrated and operating as DAS, the contribution from this new business will be first reflected in the Company’s half year results.”

Stojcevski also reminded investors that cybersecurity will continue to be a key focus in 2022, with intelligent solutions like Zero Trust enabling secure, compliant, and protected technology environments.

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Dicker Data share price has been losing ground over the last three months.

What brokers think

Consensus on Dicker Data is Strong Buy.

Based on Morningstar’s fair value of $12.82, the stock appears to be undervalued.

Morgan Stanley believes the company can sustain elevated medium-term growth as it benefits from secular IT tailwinds, and recently initiated coverage with an Overweight rating and target price of $16, which represents a 27.3% upside based on the current price ($12.45).

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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