The Dicker Data Ltd (ASX: DDR) share price is on the move today after the business provided a third quarter update.
Unlike most Australian companies that run on a financial year calendar, Dicker Data operates on a calendar year basis, from 1 January to 31 December.
Currently, the Dicker Data share price is up 11.74% to $14.75.
Exeed acquisition accelerates growth
For the nine months to September 30 2021, Dicker data achieved:
- Total revenue of $1.72 billion, up 16.1% year-on-year (YoY)
- Profit before tax (PBT) of $76.6 million, up 26.0% YoY
During the quarter, Dicker Data benefitted from two months of contribution from the recent acquisition of Exeed Group.
Over August and September, Exeed achieved revenue of $65.2 million and a $1.9 million net profit.
Exeed is a New Zealand based IT distributor. It is expected the addition of Exeed will more than double Dicker Data’s revenue from New Zealand to $500 million for FY22.
It also adds 1,200 resellers under one roof and a base for Dicker Data to meaningfully launch into the New Zealand market.
Excluding the impact of Exeed, Dicker data revenue increased 11.7% YoY and PBT jumped 22.9% YoY.
On a quarterly basis, revenue from Q3 declined 5% once the Exeed acquisition is stripped out. However, PBT still increased 16% due to margin expansion.
The continued global chip shortage and consequent supply constraints have contributed to an overall improvement in margin quality.
Demand elevated despite chip backlog
The global chip shortage is expected to continue for the foreseeable future as manufacturers work to create more supply.
Dicker data noted the US and Europe were experiencing higher allocations than the APAC region. However, the situation is improving with time.
The company has a backlog of orders to fulfil and expects to meet this demand in the final quarter of 2021.
Positively, demand remains elevated and the company sees no signs of this abating in the near term.
Dicker has also identified significant future opportunities to accelerate growth in the tech sector.
“As digital transformation continues to accelerate, the role of technology in business success continues to proliferate and the evolving hybrid and modern workforce becomes increasingly dependent on more intelligent, faster and collaborative technology solutions”.
Cybersecurity and 5G connectivity tops the list and is a key focus for the remainder of 2021.
My take
A very bullish update from Dicker Data.
Despite short term supply headwinds, demand is strong and will only entrench the importance of distributors such as Dicker Data as companies continue to digitise.
However, at a price to earnings ratio of about 35, the Dicker Data share price is too expensive for me. As a result, it remains on my watchlist.
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