PLEAS­ANT PROSPECTS

Finweek English Edition - - Companies & Markets -

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.

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