EXPANSION INTO emerging markets, tight control over expenses and a new agreement may help boost the performance of ICT group Datatec. The group consists of three divisions: Westcon (mainly involved in distribution), Logicalis (a provider of ICT infrastructure solutions and services) and its consulting services division.
The group reported a 20% decrease in earnings before interest, tax, depreciation and amortisation (EBITDA) from US$151m to $126m for the year to end-February 2009, largely due to currency fluctuations and declining economic conditions. Despite that drop cash flow remained positive, increasing 178% to R95m from R34m. That was a result of strong cash generated from Westcon, which accounted for 66% of the group’s revenue and 50% of EBITDA.
Although Datatec’s strategy continued to strive for organic growth, geographical expansion and rewarding acquisitions, cash reserves allowed it to maintain its annual capital distribution of $0,12/share. That’s set to be paid in July this year. According to its financial statements Datatec’s net asset value is $3,28/ share, which translates into a R25,83 NAV in rand terms using the average US dollar/rand exchange rate US$1/R8,70. Compared with its price of R17,24 at the time of writing, the share seems undervalued and the McGregor BFA analysts’ recommendation of a buy holds water. A forecast dividend yield of 5,69% also adds to the share’s allure.