# DTL - Data#3 Limited



## craft (1 October 2011)

Surprisingly there doesn’t seem to be a thread already for this great little wealth creator. 

From last year’s AGM presentation



> Firstly liquidity – as an investor said to me recently, “If shareholders are concerned
> about getting in because there’s insufficient liquidity to get out, they aren’t the sort
> of shareholders you want.” Another said “there’s just not an opportunity to get set”.
> Interesting perspectives! Unfortunately there isn’t much we can do about liquidity.
> ...




At this year’s AGM they will be putting forward a proposal to split the shares 10 for 1

If nothing else maybe the added liquidity will help raise this company’s profile. 

Anybody have any thoughts for or against the split.


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## robusta (1 October 2011)

Yes we are a wierd mob, we are up to page: 34 on the TZL thread, 447 on Wellington Capital, 275 Storm Financial and yet this gem of a wealth creator has not rated a mention until now.

Great ROE, nice dividend yield, solid cash flows, damn so many good investments available at the moment, so little capital available.

As for the share split it may add liquidity and a bit of a boost to the sp IMO, but should make little difference to a business that I would love to buy and hold.

If I own 1 share at $11.50 or 10 shares at $1.15 after the split I would be very happy either way with the 7% plus and growing dividend yield. Sp appreciation is almost certain to folllow.


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## robusta (1 October 2011)

I have not done any detailed research on DTL but from comsec history since listing in Jan 1988 the sp has gone from $1.80 to $11.50 today with a low of $0.31 during the tech wrech, dividends have gone from $0.12 pa fully franked to $0.77 fully franked this year.

Not sure what the CAGR is but must be too booring, maybe I should research some guys drilling holes in the ground hoping to find something to dig up.


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## Ves (1 October 2011)

I purchased some DTL shares for $10.81 on Wednesday.

Phenomenal that a company with $30 mil equity has $54mil cash in the bank. Excellent cash flow and ROC / ROE.

DTL is in an excellent position, they have focused on organic growth through low operating margins. Top line growth has been very good since the GFC. When margins are allowed to expand their earnings power has the potential to take off.


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## craft (2 October 2011)

robusta said:


> Not sure what the CAGR is but must be too booring



 Yep turning 10K into half a million over the last 10 years is way boring. Yawwwn. Nothing to see here move on.









robusta said:


> maybe I should research some guys drilling holes in the ground hoping to find something to dig up.





robusta said:


> we are up to page: 34 on the TZL thread




Now this is way more exciting.


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## craft (2 October 2011)

robusta said:


> If I own 1 share at $11.50 or 10 shares at $1.15 after the split I would be very happy either way with the 7% plus and growing dividend yield. Sp appreciation is almost certain to folllow.




Hi robusta

In theory the share split should make no difference.  But in theory there is no difference between theory and practice. In practice there is.

I'm wondering if the increased liquidity will lead to some degree of PE expansion. In one way this would be a bit of a shame because despite DTL's historical performance it has always remained relatively cheap which is great for ploughing the dividends back in.

I’m wondering why they have chosen to increase liquidity now – Is it about keeping fund managers happy as it approaches possible inclusion in the ASX300 or is about something else – I noticed two directors selling in August, does that have any relevance?


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## robusta (2 October 2011)

craft said:


> Hi robusta
> 
> In theory the share split should make no difference.  But in theory there is no difference between theory and practice. In practice there is.
> 
> ...




Sorry Craft I do not have opinion on possible PE expansion after the split, as for the directors selling I normally like to see them buying but it is not the most reliable indicator either way.

This is a real gem of a company, do you think the growth can continue into the future at anywhere near the historical average?


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## Ves (2 October 2011)

Off-topic - but craft, what are you using to generate the company vs asx historical graphs?


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## RandR (2 October 2011)

I had a peek at this company as it came up on my scan, but i decided against it as I dont really understand how the company will fare in the changing tech environment (the cloud etc).

Would be very interested to hear from people more familiar with the workings (both positive and negative) of the company and the most likely future direction of it as technology moves away from 'physical' software.


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## craft (2 October 2011)

Ves said:


> Off-topic - but craft, what are you using to generate the company vs asx historical graphs?



10 Year total return charts from Morningstar’s FinAnalysis. 



robusta said:


> do you think the growth can continue into the future at anywhere near the historical average?



 That’s the million dollar question - perhaps literally. All I can safely say is that I’m comfortable holding and even topping up based on currently known information.  Who knows what tomorrow will bring – certainly not me.


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## craft (2 October 2011)

RandR said:


> I had a peek at this company as it came up on my scan, but i decided against it as I dont really understand how the company will fare in the changing tech environment (the cloud etc).
> 
> Would be very interested to hear from people more familiar with the workings (both positive and negative) of the company and the most likely future direction of it as technology moves away from 'physical' software.




Hi R&R Last years AGM presentation had a section which addressed concerns a prospective investor might have. Well worth a read to get the companies perspective, cloud computing is considered page 23-25.

http://www.asx.com.au/asxpdf/20101105/pdf/31tpybvtsylsds.pdf


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## RandR (14 November 2011)

craft said:


> Hi R&R Last years AGM presentation had a section which addressed concerns a prospective investor might have. Well worth a read to get the companies perspective, cloud computing is considered page 23-25.
> 
> http://www.asx.com.au/asxpdf/20101105/pdf/31tpybvtsylsds.pdf




It was food for thought. For me, regardless of what happens tech wise .. the key to Data#3 for the future is *management*. Obviously they have been very successfull. If the current management can stay together for a couple of years I have not alot of doubt that DTL will continue to be wildly profitable and grow.

That aside I still have reservations about the future of the space this company operates in. Technology wise.


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## craft (15 November 2011)

RandR said:


> That aside I still have reservations about the future of the space this company operates in. Technology wise.




Good to have reservations - If you don't then you are probably missing something.

I actually see technological change as a driver for DTL’s revenue rather than a threat . If technology becomes less complex, fails to be an imperative for increasing efficiency or solves the issues around data integrity and security then I may become more wary of the impacts upon DTL. The new 'trusted cloud' delivery model has the potential to be beneficial through increasing difficulty of customers switching. Public cloud not a hugely suitable alternative for DTL's business customers because of data integrity issues.

Some potential short-term dampers in recent announcements. Increased investment by DTL in their business processes,  some customers potentially holding back IT capital spend. Large Federal Government contract also out for renewal and  Microsoft potentially changing re-seller terms. 

Long term – If there is a better company in this niche then I haven’t found it. I hold.


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## GG999 (30 January 2012)

I guess that there's something that I don't understand

ROA = 9%
ROE = 50%


Net Margin 2.2
Asset Turnover  4.2
Financial Leverage 5.5

Yet very little debt  (?)
If so why is it called 'financial leverage'?

cheers
tk


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## Ves (30 January 2012)

GG999 said:


> I guess that there's something that I don't understand
> 
> ROA = 9%
> ROE = 50%
> ...



 DTL has a very low fixed capital requirement. It funds it growth through its working capital. Take out the working capital (current assets and liabilities) then do an ROA calculation. It doesn't require long-term debt or equity injection to fund its operations or growth due to this tremendous cashflow provided by working capital alone. 

$56 million cash at last reporting date compared to $30 million in equity. Does this help?

Look at net profit or sales compared to fixed assets. Working capital is in a constant state of flux and can be recycled many times per period.

Operating margin is low because it is a low-cost base, high-variable cost service provider. DTL focuses on cost leadership & high volume of transactions.


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## GG999 (31 January 2012)

Ves said:


> DTL has a very low fixed capital requirement. It funds it growth through its working capital. Take out the working capital (current assets and liabilities) then do an ROA calculation. It doesn't require long-term debt or equity injection to fund its operations or growth due to this tremendous cashflow provided by working capital alone.
> 
> $56 million cash at last reporting date compared to $30 million in equity. Does this help?
> 
> ...




Thanks Ves
So DTL is looking very good.

I'm still wondering why by the Du Pont analysis it appears that the 'Financial Leverage' is over 5 - is it right to think that they are highly leveraged?

How did they get so many assets without using leverage


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## GG999 (2 February 2012)

I guess that using the Dupont equation, DTL comes out with high leverage simply because they have high current liabilities - so in a way they are borrowing from their suppliers. Is this right? Or should I be asking in a different forum where they discuss these things - any suggestions?

Is this considered a good type of leverage compared to long-term debt where the company would have to be paying interest? Is DTL particularly good compared to other companies in not paying suppliers straightaway?


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## McLovin (2 February 2012)

GG999 said:


> I guess that using the Dupont equation, DTL comes out with high leverage simply because they have high current liabilities - so in a way they are borrowing from their suppliers. Is this right? Or should I be asking in a different forum where they discuss these things - any suggestions?
> 
> Is this considered a good type of leverage compared to long-term debt where the company would have to be paying interest? Is DTL particularly good compared to other companies in not paying suppliers straightaway?




It's much better to use your suppliers to finance your operations than to use debt. You get ~30 days to pay and you're not charged interest. A lot of high turnover retailers (supermarkets, Reject Shop etc) will often have negative working capital because their suppliers are funding it.

A company's ability to use their suppliers to create float is really dependent on what they are selling and how long it takes to transform what their suppliers sell them into whatever they want to sell.


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## GG999 (5 February 2012)

McLovin said:


> It's much better to use your suppliers to finance your operations than to use debt. You get ~30 days to pay and you're not charged interest. A lot of high turnover retailers (supermarkets, Reject Shop etc) will often have negative working capital because their suppliers are funding it.
> 
> A company's ability to use their suppliers to create float is really dependent on what they are selling and how long it takes to transform what their suppliers sell them into whatever they want to sell.




Thanks for that. So I think I'm understanding that a high ROE due to high leverage is good provided that that the high leverage isn't because of a lot of long-term borrowing which increases risk.

Should one look for other companies like DTL in this respect? I was thinking that one would easily screen for them by looking for

High ROE = similar high ROC,   but lower ROA


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## McLovin (5 February 2012)

GG999 said:


> Thanks for that. So I think I'm understanding that a high ROE due to high leverage is good provided that that the high leverage isn't because of a lot of long-term borrowing which increases risk.




Within reason. It depends on the business. There are plenty of examples of businesses that have tried to increase their float by delaying payment of their accounts. Eventually, their suppliers might stop supplying them. Iirc, David's (which became Metcash) was almost blacklisted by Arnott's because they had stretched their days payable to ~120, which would have meant a lot of angry stoners at IGA unable to get their Tim Tams.



GG999 said:


> Should one look for other companies like DTL in this respect? I was thinking that one would easily screen for them by looking for




As above, you need to know the nature of the industry. Negative working capital can also be a sign a company is on its last legs.


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## notting (5 February 2012)

McLovin said:


> which would have meant a lot of angry stoners at IGA unable to get their Tim Tams.




Love it!


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## fanger (27 February 2012)

So what did people think of the half year earning results?


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## robusta (27 February 2012)

fanger said:


> So what did people think of the half year earning results?




I think the price for DTL is now becoming very interesting.


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## notting (27 February 2012)

robusta said:


> I think the price for DTL is now becoming very interesting.



Yeah, good company and technically it has reversed out of this area pretty savagely since Nov 2010.
Yet with management not wanting to give a forecast due to uncertainty, this time may not be so positive if markets start slipping on the oil being spilled all over the slopes at present!!


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## craft (28 February 2012)

fanger said:


> So what did people think of the half year earning results?




Report was reasonable.

Profitability is on long term trend – but that is a decrease over PCP which was well above trend.

In comparison to the industry, DTL was being priced according to the above trend earnings and that seem to be now coming off. The whole sector is pretty cheap but the near term outlook is of headwinds.

Top line growth was 15% - well above sector growth but expenses grew by an even greater amount.

Management were basically caught out investing(additional people) for growth in higher margin infrastructure project services. Customers have withheld decisions on these projects leaving DTL with an overweight structure for the current market.  From here on of a couple of things could happen. The market picks up and DTL’s structure gets utilised or the market does not come back and DTL has to reallocate or reduce resources. Whilst the first outcome is preferable the second is O.K so long as they can get their internal cost ratio back down. DTL’s big advantage is that when the high margin business dries up they have their product sales division to fall back onto. They just have to keep their structure tuned to the market.

A couple of major federal and QLD government contracts come to market shortly. DTL is well placed to retain these contracts as they have the lowest cost structure – though if you think of  business as a game of risk you can imagine competition attacking here at any cost because DTL is not that far away from unassailable domination in this area, retaining the contracts could just about cement things for a very long period. Will be interesting.

DTL is pretty much at across road now. Either it has exhausted its niche and is going to see its margins squeezed under competitive pressures or it is going to dominate the industry and enjoy another growth phase until it runs into market saturation problems.

To a small degree I was more confident of the latter until this report – Contract renewal outcomes and internal cost ratio trend is what I’m looking at to indicate the future direction. The fact that top line growth has continued is a positive as is the strength of the balance sheet.


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## odds-on (28 February 2012)

craft said:


> In comparison to the industry, DTL was being priced according to the above trend earnings and that seem to be now coming off. The whole sector is pretty cheap but the near term outlook is of headwinds.
> .




My concern with DTL (and some of the other IT companies which perform well) is the whole sector is priced relatively cheap...........but this could continue for some time irrespective of the business performance. Prices actually need to drop even further to provide a realistic chance of a decent return in the current environment or the "market" needs to reprice some of the IT companies. Once bitten, twice shy (DWS!).

Cheers

Oddson


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## Ves (15 March 2012)

craft said:


> A couple of major federal and QLD government contracts come to market shortly. DTL is well placed to retain these contracts as they have the lowest cost structure – though if you think of  business as a game of risk you can imagine competition attacking here at any cost because DTL is not that far away from unassailable domination in this area, retaining the contracts could just about cement things for a very long period. Will be interesting.



 Federal government Microsoft software contract renewed for "at least three years" today. I do not follow the announcement 100% but did they get an extension of the scope of the contract of some sorts?


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## robusta (15 March 2012)

odds-on said:


> My concern with DTL (and some of the other IT companies which perform well) is the whole sector is priced relatively cheap...........but this could continue for some time irrespective of the business performance. Prices actually need to drop even further to provide a realistic chance of a decent return in the current environment or the "market" needs to reprice some of the IT companies. Once bitten, twice shy (DWS!).




Yeah DWS is a bugger, I hate putting up with a 10% + dividend yield while the sp fluctuates.


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## robusta (13 April 2012)

Picked up some DTL today at $1.055 for my SMSF, tried to buy some for my personal account when the price fell further but my order did not get filled.


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## notting (13 April 2012)

Was tanking on the back of worst performing sector on global markets until Team invest guy talked it up on sky, it reversed and finished on it's highs.  Not an overly liquid one!
I'd expect that to reverse fairly shortly on global sentiment as governments all over the world still try to reign in spending and for that they love hacking into IT.
Won't be going in hard for quite some time I imagine.


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## robusta (14 April 2012)

I guess it could depend on your investment time horizon. The immediate outlook for this sector is not very positive but that is why the prices are attractive IMO from a long term perspective.

Not that I spend a lot of time looking at macro factors but with Mr Swans apparent need for a surplus I can understand softer prices.

In the long term however I see a couple of possible scenarios;

1 The economy goes to recession, the government adds stimulus.

2 The economy grows around trend and we remain the lucky country.

Either way I think demand for IT will grow, given enough time.

Would be nice to know how low prices will fall in the meantime however, my damn crystal ball is broken.


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## Nutmeg (14 April 2012)

craft said:


> Report was reasonable.
> 
> Profitability is on long term trend – but that is a decrease over PCP which was well above trend.
> 
> ...




Just on the issue of DTL's operating margin, does anyone know why it's so narrow compared to other providers?  It's only 3% or 4% if memory serves.


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## TrendGAIN (15 April 2012)

Looks like DTL is at a decision point - going lower will be very negative as it is right in the middle of major support , but downward momentum is slowing. Hard to read the volume picture due to the big movement in early Feb, but money doesn't seem to be streaming out of the stock.


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## McLovin (15 April 2012)

Nutmeg said:


> Just on the issue of DTL's operating margin, does anyone know why it's so narrow compared to other providers?  It's only 3% or 4% if memory serves.




Software reselling (which I understand is still their primary business) would be high volume low margin.


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## craft (15 April 2012)

Nutmeg said:


> Just on the issue of DTL's operating margin, does anyone know why it's so narrow compared to other providers?  It's only 3% or 4% if memory serves.




2011 Product revenues were $586 Million with a gross margin of 10.2%, Services revenue was $110 Million with a gross margin of 47.1%.

Overall Gross margin was 16.1% and Net Profit margin was just 2.15%. 

The secret to understanding DTL and its investment case is the competitive advantage it has as the low cost supplier of product, the robustness of this revenue stream and how the turn-over converts  a 2.15% net margin into a 50% ROE with no debt.

The service revenue segment whilst having the higher margin is also where all the competition is. To the competitors this segment is core – to DTL it is cream, enabling them to weather downturns so much better.
Looking at recent announcements (contract renewals, supplier awards) there is a lot pointing towards DTL having cemented its low cost advantage for a long time to come.

Short term I think people should sell sell sell, the chart is down and short term IT spend is uncertain at best. Did I mention the sky is falling!  (Disclaimer – I could be buying)


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## Ian (15 April 2012)

Craft, 
You picked the key issue for me. 
ROE average for the last 10 years is 39% and lowest ROE during that period is 28%. By any standards it's an amazing achievement. AND NO DEBT with current divi about 7% ff and stable management. 
From an investors viewpoint it is hard to imagine a better formula than that. 
So do I think it's a good investment opportunity for me now?. Yes I do.  
Will it be a better/worse opportunity for me shortly?. Who knows. No-one is the answer. But I don't see that as the critical question for an investor to answer. 
Do I like buying stocks like DTL when wobbly nerves or panic is in the air?. Yes I do. 

I have no view about its technical trading performance. I don't understand that style of investing so I leave it entirely to those that do. 

My guess (adding to some of the recent comments made about its performance but not ignoring them) is the recent 10 v 1 split brought a new type of holder to DTL's registry. Under the old format I doubt there were any (or at best very few) short term holders / technical investors. Since the 'split' the stocks sp is in the range of shorter term investors. I think this has created its own dynamics that will take a little time to resolve itself, and in that process it helps to create the current opportunity. 

Not advice of course. 
Good luck whatever you decide. 
cheers


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## Nutmeg (16 April 2012)

Thanks for the responses, gents.  Those razor-thin margins would need to be watched very closely no matter how high the ROE.


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## craft (16 April 2012)

Nutmeg said:


> Thanks for the responses, gents.  Those razor-thin margins would need to be watched very closely no matter how high the ROE.




Compare its performance against its peers through the 2008 slow down and see how they all came out the other side.  What correlation there is between Margin and Profit is probably the reverse of what you might think.

Low-margin business doesn’t necessarily hold more earnings risk than high-margin businesses. You really need to delve a bit deeper and evaluate the nature of the earnings. Data 3’s product earnings are from a distribution type business with a very high variable cost component.

The thing I watch most closely because of the thin margins is bad debts.


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## Ves (17 May 2012)

CanOz  -  look at the bar on this chart today.  Almost a "wash bar", just a bit of weakness at the close.  Got back to 98c from 90c at one point.  I guess it doesn't quite count.


Craft  - I had a look at their Goldman Sachs presentation notes. The sellers obviously disagree with me  (they've also been selling SMX and ASZ this week too, not sure about other ASX Info Tech stocks though).  Page 14 which shows the Tender Flow fascinates me.  There is less tenders  this year and some of the undecided tenders may be withdrawn due to uncertainty (probably why people are selling as it shows the industry slowing) but DTL seem to have positioned themselves well as they are winning a higher percentage this year compared to the previous two.

edit: they also could be bidding on less tenders, and being more selective with those they choose to pursue too.  Hard to say.

Also note that they "culled" or re-deployed staff after the last report, which you wanted to see.

Do you have any thoughts?


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## CanOz (17 May 2012)

Ves said:


> CanOz  -  look at the bar on this chart today.  Almost a "wash bar", just a bit of weakness at the close.  Got back to 98c from 90c at one point.  I guess it doesn't quite count.




Yeah Ves, not quite a wash out yet, but found a little support at a confluence of supporting elements on the weekly:
1.) an old high at a consolidation zone
2.) the 200 MA
3.) the FIBB 

You might get a bounce, or even some consolidation if the broader market holds up...but if it were able to be shorted i would be looking for an opportunity to enter short, not a long. Just my view.

Cheers,


CanOz


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## Ves (17 May 2012)

Thanks mate!  I don't use technicals in practice, but I still enjoy looking at the theory of them when presently well like you have above.  Kicking myself a bit for not adding to my holding today, but I am sure there will be plenty of opportunities with the IT sector, and the general economy on the nose.


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## craft (17 May 2012)

Ves said:


> CanOz  -  look at the bar on this chart today.  Almost a "wash bar", just a bit of weakness at the close.  Got back to 98c from 90c at one point.  I guess it doesn't quite count.
> 
> 
> Craft  - I had a look at their Goldman Sachs presentation notes. The sellers obviously disagree with me  (they've also been selling SMX and ASZ this week too, not sure about other ASX Info Tech stocks though).  Page 14 which shows the Tender Flow fascinates me.  There is less tenders  this year and some of the undecided tenders may be withdrawn due to uncertainty (probably why people are selling as it shows the industry slowing) but DTL seem to have positioned themselves well as they are winning a higher percentage this year compared to the previous two.
> ...




As has been flagged IT spend is uncertain. The tender flow looks as though they are winning more, as I would expect as the lowest cost supplier however the delayed decisions show no sign of abating.

This is the red flag in the presentation. 







> Committed to higher cost structure to support investment.



 They are flagging a reduced margin because they are carrying costs for an upturn - obviously they are expecting it to come. Maybe it will maybe it wont. but either way investment for long term growth is poison to anybody who requires instantaneous gratification from a share price – and that is most people/funds.


Short term I think people should sell sell sell, the chart is down and short term IT spend is uncertain at best. Did I mention the sky is falling! (Disclaimer – I could be buying)


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## CanOz (17 May 2012)

Ves said:


> Thanks mate!  I don't use technicals in practice, but I still enjoy looking at the theory of them when presently well like you have above.  Kicking myself a bit for not adding to my holding today, but I am sure there will be plenty of opportunities with the IT sector, and the general economy on the nose.




Ditto, i don't use fundamental data, other than macro, but i enjoy listening to you guys discuss them.ldold wiseman)

Cheers,


CanOz


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## Ves (17 May 2012)

Craft, did they take the same approach in the GFC? I figure they are less likely to be hurt from higher investment cost risks than their competitors because of the reliability of their software distribution earnings.


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## Ves (19 May 2012)

Craft,

Here is some ratios I calculated  (employee wages   +  other contractor wages)   / revenue:

2005           21.20%
2006           23.29%
2007           25.70%
2008           24.40%
2009           17.69%
2010           15.71% 
2011           16.91%
2012FY        15.12%

Personnel costs as a proportion of revenue seems to be shrinking.  Is it possible that they brought a heap of COGS forward?


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## McLovin (19 May 2012)

All these companies seem to be building some sort of cloud offering. Until they start getting companies in it it's going to be costing them. In running costs (rent/power/cooling) + depreciation.

Could this be what they meant?


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## craft (19 May 2012)

Ves said:


> Craft,
> 
> Here is some ratios I calculated  (employee wages   +  other contractor wages)   / revenue:
> 
> ...




Hi V

I get different numbers – did you include employee benefit expenses?

2008	37%
2009	33%
2010	26%
2011	25%
2012	27%

Last time around they took on extra head count by picking up a lot of the Commander Communications employees after that company collapsed.

I suspect the heads up is saying they will head back towards the 2008, 2009 numbers for this ratio. 

Industry leaders are established by their ability to invest and gain market share in the tough times. (They survive the creative destruction and thrive on the other side.)


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## Ves (19 May 2012)

craft said:


> Hi V
> 
> I get different numbers – did you include employee benefit expenses?
> 
> ...



 Hi Craft,

It would seem I didn't.   I can see it now after looking at note 7 of the 2011 financials.   Where does this show up on the Income Statement?


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## Ves (19 May 2012)

McLovin said:


> All these companies seem to be building some sort of cloud offering. Until they start getting companies in it it's going to be costing them. In running costs (rent/power/cooling) + depreciation.
> 
> Could this be what they meant?



I don't think DTL are investing in the infrastructure,  my reading of their strategy was that they would be providing consulting advice to corporates as to how to implement and design their own infrastructure.  Perhaps I am wrong? I thought they were planning to be more of a "middle man" between provider and customer.


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## McLovin (19 May 2012)

Ves said:


> I don't think DTL are investing in the infrastructure,  my reading of their strategy was that they would be providing consulting advice to corporates as to how to implement and design their own infrastructure.  Perhaps I am wrong? I thought they were planning to be more of a "middle man" between provider and customer.




Hmmm...I'm not sure. They do have a product called "Data #3 Trusted Cloud" and a data centre in Sydney.

Is there not a risk with these guys that if other companies are all providing the consulting and the cloud as a one stop shop DTL may be frozen out? Probably even more important for DTL as virtualisation will have some impact on their software reselling business.


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## Ves (19 May 2012)

McLovin said:


> Hmmm...I'm not sure. They do have a product called "Data #3 Trusted Cloud" and a data centre in Sydney.
> 
> Is there not a risk with these guys that if other companies are all providing the consulting and the cloud as a one stop shop DTL may be frozen out? Probably even more important for DTL as virtualisation will have some impact on their software reselling business.



Have a look at post #11 in this thread by Craft and have a read of the AGM presentation he linked.


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## craft (19 May 2012)

McLovin said:


> Hmmm...I'm not sure. They do have a product called "Data #3 Trusted Cloud" and a data centre in Sydney.
> 
> Is there not a risk with these guys that if other companies are all providing the consulting and the cloud as a one stop shop DTL may be frozen out? Probably even more important for DTL as virtualisation will have some impact on their software reselling business.




DTL have spent about 10 Million on PPE since listing whilst generating something like 3.5 Billion in revenue. Most of the PPE is leasehold improvements incurred to house the staff. Last Annual report they had 160K on the books for equipment and 200K for software assets. Infrastructure spend is immaterial - This is a people business. They sell products and services. Can you see a day when their customers will not need product to improve business efficiency and services to help them implement it? 

Do you understand where Virtualization already sits within DTL’s business mix? The sensitivity to data security for DTL’s customer base makes the cloud fairly immaterial; they have their own trusted cloud for service/product delivery for any customer that may be able to go that way but most of their customers will want more control over their data.


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## McLovin (19 May 2012)

craft said:


> DTL have spent about 10 Million on PPE since listing whilst generating something like 3.5 Billion in revenue. Most of the PPE is leasehold improvements incurred to house the staff. Last Annual report they had 160K on the books for equipment and 200K for software assets. Infrastructure spend is immaterial - This is a people business. They sell products and services. Can you see a day when their customers will not need product to improve business efficiency and services to help them implement it?




Thanks for clarifying. 



craft said:


> Do you understand where Virtualization already sits within DTL’s business mix? The sensitivity to data security for DTL’s customer base makes the cloud fairly immaterial; they have their own trusted cloud for service/product delivery for any customer that may be able to go that way but most of their customers will want more control over their data.




I have no idea where they sit in terms of vitualisation. I actually find these IT companies quite difficult to delineate. What would the effect of vitualisation be on their business, in your opinion?



			
				Vespuria said:
			
		

> Have a look at post #11 in this thread by Craft and have a read of the AGM presentation he linked.




I'll check it out.


----------



## craft (19 May 2012)

McLovin said:


> I have no idea where they sit in terms of vitualisation. I actually find these IT companies quite difficult to delineate. What would the effect of vitualisation be on their business, in your opinion?




http://www.data3.com/data3-leads-with-virtualisation-from-the-datacentre-to-the-desktop




> Data#3 is proud to have our commitment to developing and maintaining the highest levels of vendor certified expertise, along with our success in delivering large and complex solutions based on VMware technologies, validated by these awards,” said Baynham. “Coupled with our previous win, it is clear that Data#3 is an industry leader in supplying Australian organisations with virtualisation solutions based on VMware technologies from the datacentre to the desktop.




Opportunity!


----------



## craft (19 May 2012)

McLovin said:


> I actually find these IT companies quite difficult to delineate.




CPU, DTL, IRE, MLB, RKN, SMX


----------



## Ves (19 May 2012)

craft said:


> CPU, DTL, IRE, MLB, RKN, SMX



JIN


----------



## skc (19 May 2012)

Ves said:


> JIN




Jin is not a IT company. It is a marketing company with a customer database and a licence to sell lotto tickets. It's main licence is up for renewal in 2013 and i have no idea how people know that it will be renewed. 

At 40c it may have been an even money bet, at today's price i am not so sure. It may work out but it will be due more to luck or insightful punt rather than fundamental valuation.


----------



## ROE (19 May 2012)

CPU isn't an IT company.
IT companies business are business you derive revenues from Selling IT
software, services, infrastructure support etc...

CPU is a data processing and registry company that heavily use IT.
They dont make money selling IT related services ..They make money by keeping registry
for companies and process boring data task such as investor mail out, communication etc...

JIN is also heavy user of IT as well but their business is online lottery, they fall under lottery regulation
and it is a heavy regulated industry so it isn't easy for someone to start up an online lottery business.

anyone can start up a web site and sell goods but not lottery...that why you dont see many around apart from ozlotteries and of course the guys that hold the government license like Tatts, monopoly via regulation.

JIN is subject to a lot of control and process and audit, it is not as simple as selling a ticket online. Make that just a little harder for someone else to come into the game


----------



## craft (19 May 2012)

ROE said:


> CPU isn't an IT company.
> IT companies business are business you derive revenues from Selling IT
> software, services, infrastructure support etc...
> 
> ...




Hi ROE

Just listed a handful of names from the software & services GICS classification that I thought are strong in their niches.

The GICS classifications are a bit ......

I Know I started this - but probably better to discuss the actual companies in their own threads unless there is some competitor aspect in relation to DTL.

Cheers


----------



## McLovin (20 May 2012)

craft said:


> http://www.data3.com/data3-leads-with-virtualisation-from-the-datacentre-to-the-desktop
> Opportunity!




My question is more about how virtualisation will affect the software reselling business. My limited understanding of virtualisation is that it may create a situation where fewer licenses are needed in an organisation.



			
				craft said:
			
		

> CPU, DTL, IRE, MLB, RKN, SMX




I should have been more specific. IT consultantcy and contracting companies.


----------



## craft (20 May 2012)

McLovin said:


> My question is more about how virtualisation will affect the software reselling business. My limited understanding of virtualisation is that it may create a situation where fewer licenses are needed in an organisation.





Their business is improving customer’s productivity and efficiency through Information Technology. Virtualisation has been part of the mix for a long while and product revenue has continued to grow. Their customer base isn’t exactly the inefficient users of technology that can suddenly drop their costs by adopting Virtualisation. 





McLovin said:


> I should have been more specific. IT consultantcy and contracting companies.




DTL - The product revenue arm gives them a competitive advantage.


----------



## McLovin (20 May 2012)

craft said:


> Their business is improving customer’s productivity and efficiency through Information Technology. Virtualisation has been part of the mix for a long while and product revenue has continued to grow. Their customer base isn’t exactly the inefficient users of technology that can suddenly drop their costs by adopting Virtualisation.




Guess I need to do a bit more reading on this. Thanks.


----------



## McCoy Pauley (21 May 2012)

McLovin said:


> I should have been more specific. IT consultantcy and contracting companies.




Off the top of my head, you'd have SMX, OKN, DWS and DTL.  I have a feeling that the likes of Dicker Data and UXL are also IT consultancies/contractors, but I haven't done any research into them.


----------



## Nutmeg (21 May 2012)

McCoy Pauley said:


> Off the top of my head, you'd have SMX, OKN, DWS and DTL.  I have a feeling that the likes of Dicker Data and UXL are also IT consultancies/contractors, but I haven't done any research into them.




Dicker Data are computer resellers.


----------



## skc (21 May 2012)

McCoy Pauley said:


> Off the top of my head, you'd have SMX, OKN, DWS and DTL.  I have a feeling that the likes of Dicker Data and UXL are also IT consultancies/contractors, but I haven't done any research into them.




UXC is in fact 2nd largest. This from their recent presentation.





Salmat has a fair bit of PMP type operations so not strickly in this space. DDR resells computers, much like the was CSV sells/fixes photocopiers - but both are listed under IT.

Other niche IT plays include IRE (market data/platform), TNE (ERP), MLB (domain registry) etc.


----------



## robusta (15 June 2012)

Well looks like business as usual for DTL.

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=DTL#headlines

I still can't believe this business traded below $1.00 for so long.

The next thing to watch for is the renewal of the QLD govt contract, this will have a material impact either way.


----------



## McLovin (15 June 2012)

McLovin said:


> Guess I need to do a bit more reading on this. Thanks.




True to my word, I went away and did a lot more. My opinion of this company has changed, primarily because I understand it far better.

For anyone who is struggling I suggest this recent workshop with a few analysts.

http://www.brrmedia.com/event/98161/john-grant-laurence-baynham-and-pat-murphy

It's long (90) minutes, but well worth it. The overwhelming feeling I got was that management wasn't trying to sugarcoat things, they know it's slowing down at the moment but they've seen it all before.


----------



## Noddy (15 June 2012)

robusta said:


> Well looks like business as usual for DTL.
> 
> http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=DTL#headlines
> 
> ...




Not trading below $1.00 today
Going gangbusters.


----------



## craft (15 June 2012)

McLovin said:


> It's long (90) minutes, but well worth it.




Hard work pays dividends

Are you on board, considering, watching?


----------



## Ves (15 June 2012)

Noddy said:


> Not trading below $1.00 today
> Going gangbusters.



I'm sure it will again over the next few years.  Still fairly cheap on most basic metrics.


----------



## robusta (15 June 2012)

Noddy said:


> Not trading below $1.00 today
> Going gangbusters.






Ves said:


> I'm sure it will again over the next few years.  Still fairly cheap on most basic metrics.




I agree, still good value. I hope you are right and there are opportunities to buy more decent businesses like DTL at cheaper prices in the next few years.


----------



## RottenValue (16 June 2012)

A little bit of assistance on how to look at the various companies in this sector (disclosure - I have worked in the IT sector for 30 years and may have inside knowledge of a few of these companies)

SMX, DWS, OKN and UXC can all be classified together as peers  -  they make money by providing people to help organisations implement or upgrade IT business systems.  They will argue otherwise but they are essentially large suppliers of contractor services, providing skilled resources at a rate that sits between freelancers and the large globals (IBM, Accenture, Logica, etc).  Projects tend to have defined start and end dates and growth/survival is dependant on ability to constantly win new engagements.  Subtle differences between the business models of these 4 which I can expand on if anyone is interested but in some ways thinking of them as the IT equivalents of Skilled Group is not far wrong.

ASZ is a little different in that they focus on providing managed services (multi-year support contracts), generally but not exclusively to government clients.  Their advantage is that they have long term contracts and thus repeatable revenue, disadvantage is that have much larger fixed costs in terms of data centres and dependant on winning large competitive contracts for growth.  Indian offshore companies are major threat to them - and dont fall for the "we are a cloud play" rhetoric being thrown around.

DTL are very different from the other 5 I have mentioned and really should not be looked at as the same type of company, other than they happen to play in the IT Sector.  They focus on the infrastructure side of IT, things such as desktops, hardware, cables, printers, and servers.  Backoffice essentials to keep things ticking over that the majority of normal people would rather never have to think about.  As a result, Earnings are more stable as things constantly need to be fixed, upgraded or replaced.  In addition, they have the benefit of a steady stream of licence and maintenance revenue to shore up earnings and maintain a high ROE.

Happy to add more if any interest.

Note, I dont and have never held any IT stocks confused


----------



## craft (16 June 2012)

RottenValue said:


> A little bit of assistance on how to look at the various companies in this sector (disclosure - I have worked in the IT sector for 30 years and may have inside knowledge of a few of these companies)
> 
> SMX, DWS, OKN and UXC can all be classified together as peers  -  they make money by providing people to help organisations implement or upgrade IT business systems.  They will argue otherwise but they are essentially large suppliers of contractor services, providing skilled resources at a rate that sits between freelancers and the large globals (IBM, Accenture, Logica, etc).  Projects tend to have defined start and end dates and growth/survival is dependant on ability to constantly win new engagements.  Subtle differences between the business models of these 4 which I can expand on if anyone is interested but in some ways thinking of them as the IT equivalents of Skilled Group is not far wrong.
> 
> ...




Agree that DTL is dominant in product solutions – Revenue 513 Million @10.2% Gross Margin

The services solution part of DTL's business- Revenue 109.8 Million @ 47.1% is in direct competition with the other consultant type companies.

The product solutions business is DTL’s competitive advantage and also a unique base to grow further into the services business.  The underlying stable cash flow from product services allows DTL to aggressively chase market share every time the market tightens up.

Unless something changes the industry economics I see DTL growing to dominate services as well as product in another decade.



> Happy to add more if any interest



 very interested.



> Note, I don't and have never held any IT stocks



 Is that to diversify away from your employment income or an investment view about the industry?


----------



## McLovin (16 June 2012)

craft said:


> Hard work pays dividends
> 
> Are you on board, considering, watching?




On board and watching. I have in my mind now a map of where the various IT services companies sit. Data is the big thing and where they tend to overlap, but offering just data will not make money, IMO.

As an aside, I really think more companies should be forced to use media like BRR to upload presentations/earnings/analyst's briefings..


----------



## RottenValue (16 June 2012)

> _The services solution part of DTL's business- Revenue 109.8 Million @ 47.1% is in direct competition with the other consultant type companies._



Sad that it took me so long to figure out how to use the reply to quotes featuregiven comment that I have worked all my life in IT!  

DTL not really in competion with the other listed companies even in the Services sector  -  they provide consulting services around the IT infrastructure components while the others are focused on Business Applications.  Think of it as DTL provides services that are largely directed to the internal IT organisation of a business while SMX, OKN, DWS and UXC are more focussed on the business users (ie: Finance, HR, Marketing, etc).  A small overlap with UXC but insignificant.  Note that this is a good thing!



> _Is that to diversify away from your employment income or an investment view about the industry? _




Probably a factor of knowing too much about the industry and the management teams running these organisations.  Funny really, have no problem investing in mining/engineering service companies which are really no different.

Having said that, DTL is the only one that I am interested in taking a deeper look at as it is the one I know the least about personally.  But I know who I can have a coffee with to find out how the story stands up


----------



## craft (16 June 2012)

RottenValue said:


> Sad that it took me so long to figure out how to use the reply to quotes featuregiven comment that I have worked all my life in IT!
> 
> DTL not really in competion with the other listed companies even in the Services sector  -  they provide consulting services around the IT infrastructure components while the others are focused on Business Applications.  Think of it as DTL provides services that are largely directed to the internal IT organisation of a business while SMX, OKN, DWS and UXC are more focussed on the business users (ie: Finance, HR, Marketing, etc).  A small overlap with UXC but insignificant.  Note that this is a good thing!
> 
> ...




Hi RV

Are you saying that the likes of SMX, OKN, DWS and UXC are closer aligned to the likes of TNE except providing customer specified applications - do they not venture into *infrastructure* efficiency/management/consulting/staffing? 

Appreciate your input.


----------



## Ves (16 June 2012)

McLovin said:


> True to my word, I went away and did a lot more. My opinion of this company has changed, primarily because I understand it far better.
> 
> For anyone who is struggling I suggest this recent workshop with a few analysts.
> 
> ...



I've never bothered listening to any BRR Media presentations for any companies until this arvo.  I guess I've been a bit hesitant  (both because of time and because of my assumption that it'll all go over my head).  I think this will change; the DTL preso that you linked is fantastic.  I will try to watch some of their other presentations in the next few weeks.  Cheers mate.


----------



## craft (16 June 2012)

McLovin said:


> As an aside, I really think more companies should be forced to use media like BRR to upload presentations/earnings/analyst's briefings..




Good management doesn't have to be forced into keeping their shareholders informed, they choose too. Quality of communication says a lot about management.

I have always found DTL to be good communicators. One thing I really Like.


----------



## Vader (16 June 2012)

craft said:


> Hi RV
> Are you saying that the likes of SMX, OKN, DWS and UXC are closer aligned to the likes of TNE except providing customer specified applications - do they not venture into *infrastructure* efficiency/management/consulting/staffing?
> Appreciate your input.




No, TNE have their own software stack and operate their consulting services solely around that technology stack... where as the others use other peoples technology stacks (Microsoft, Oracle, SAP etc.) to provide their business/technology services.

...so for TNE, on the plus side, they get both the license fees for their technology and the consulting fees for implementing it. On the negative side, it's a smaller sandpit that they're playing in and their future growth is tied very closely to their ability to improve on their software or acquire additional components they can plug into their framework.

As for Data3, I don't know enough about them really other than general perception and I haven't looked at their figures, but if I had to guess, I would have thought they were in decline... if that's not the case then they are obviously doing well in the IT infrastructure space.

Also, probably two of the better short-term metrics to look at with the other companies mentioned would be utilisation and # of employees. If those two figures are going up, then you should see a corresponding growth in earnings in the next lot of half yearly and annual reports as their revenues are almost completely tied to the number of people they have on client sites.


----------



## RottenValue (17 June 2012)

craft said:


> Hi RV
> 
> Are you saying that the likes of SMX, OKN, DWS and UXC are closer aligned to the likes of TNE except providing customer specified applications - do they not venture into *infrastructure* efficiency/management/consulting/staffing?
> 
> Appreciate your input.




Craft

SMX, OKN and DWS do not venture into Infrastructure consulting, UXC do to some extent through their UXC Connect business.

TNE are different again in that they have developed their own products under the Technology One banner.  They compete with the likes of SAP, Oracle and Microsoft in the business application space and have been reasonably successful at the lower end of the market, in particular local government, small water utilities and more recently higher education after Peoplesoft got swallowed by Oracle.  They have constantly surprised me by being able to carve out a niche in a very competitive environment, using the "we are Australian" sell to some success.

As Vadar indicated, the others when they are providing implementation services will focus on SAP, Oracle and Microsoft.  In this area, UXC are by far the strongest player followed by OKN and SMX & DWS a distant last.  Note however that implementation services are just one component of what these companies offer, with rankings being different if you look at consulting services or resource augmentation services (providing bodies to do whatever the client wants them to do).

DTL are in a very different sector of the IT industry - take note of the large proportion of license and maintenance revenue that they receive.  This is both a positive factor and a risk.  Consider what happens if Microsoft decide to change their licensing models in order to increase competiveness - partners such as DTL will need to just suck it up.  Also, we need to consider whether the "cloud" will be a positive or a negative for companies that focus on the Infrastructure space.  If organisations increasingly decide to not have their own infrastructure but pay a fee to access someone elses, do we believe that DTL will be a winner or loser in this situation?  Will businesses really care whether the infrastructure sits in Australia or overseas?


----------



## Ves (17 June 2012)

RottenValue said:


> DTL are in a very different sector of the IT industry - take note of the large proportion of license and maintenance revenue that they receive.  This is both a positive factor and a risk.  Consider what happens if Microsoft decide to change their licensing models in order to increase competiveness - partners such as DTL will need to just suck it up.  Also, we need to consider whether the "cloud" will be a positive or a negative for companies that focus on the Infrastructure space.  If organisations increasingly decide to not have their own infrastructure but pay a fee to access someone elses, do we believe that DTL will be a winner or loser in this situation?



I think that you can add that some of the government contracts make up fairly large chunks of their product licensing revenue. The company has previously stated this, and are obviously trying to diversify their revenue stream to reduce the risk burden that this puts on their operations.  Contract loss in this area would have a material impact on revenue, but not be the end of the world.



> Will businesses really care whether the infrastructure sits in Australia or overseas?



In reading and listening to some presentations about this issue it would seem that consumers who are not as conscious about price would prefer to have their data hosted in Australia to avoid sovereignty issues.  You can take this with a grain of salt though.

The feeling that I get is that DTL separate themselves visibly from some of the other companies in this sector by a) their excellent systems ("best practice") and b) their excellent recruiting and people management skills.  The slew of awards that they have won seems to indicate that this argument isn't far from the truth. For those contracts that are not based around solely cost this seems to be giving them an advantage - take a look at the tender bids.  The company themselves admit that the markets that they struggle in most are those emerging areas for the company such as WA where they do not have the same people power on the ground at this stage.

RV - can you list some of the companies that you believe directly compete with DTL?  Does not matter if they are not listed.


----------



## RottenValue (18 June 2012)

> RV - can you list some of the companies that you believe directly compete with DTL?  Does not matter if they are not listed




I cant really help with this at the moment as my background is in the business application area and I have never paid attention to infrastructure - always viewed it as a necessary evil, like electricity and telephone bills.  I intend to do my own research so will post when I am clearer on the players in the IT infrastructure space.


----------



## Ves (21 June 2012)

Hoping someone can help. I asked this on page #3 of the thread and it must have been missed.

At Note 7 of the financial statements in the 2011 Annual Report there is a line item called "employee benefits expense."  I believe that this mainly has to do with employee share plans, unexercised options, long-service leave provisions and other non-cash wages etc. Can someone tell me if I am on the right track?

Is this an off-balance sheet transaction until it becomes a short-term liability that will need to be paid in the next 12 months? When does it get expensed, and more importantly where would it be shown?


----------



## robusta (5 July 2012)

Wonder what happened to DTL sp today, up over 4%??

Maybe some broker upgraded it.


----------



## robusta (24 August 2012)

Results out today, about what I expected. The market did not seem to like it however with the share price falling. I will have to read the full report and listen to the brr presentation to see if there are any hidden nasties I may have missed.


----------



## Ves (25 August 2012)

robusta said:


> Results out today, about what I expected. The market did not seem to like it however with the share price falling. I will have to read the full report and listen to the brr presentation to see if there are any hidden nasties I may have missed.



Possible QLD government contract uncertainly  -  high value at risk  (V-A-R).

But why speculate?  It is more likely buy the rumour, sell the fact  (with the result - profit upgrade).

edit: they're in a good position to win this, however with Campbell Newman on a killing spree up here, who knows what is possible.


----------



## robusta (26 September 2012)

Ves said:


> Possible QLD government contract uncertainly  -  high value at risk  (V-A-R).
> 
> But why speculate?  It is more likely buy the rumour, sell the fact  (with the result - profit upgrade).
> 
> edit: they're in a good position to win this, however with Campbell Newman on a killing spree up here, who knows what is possible.




Probably a bit overdue to hear about that contract anyway I am looking for any further weakness in price to add to my investment.


----------



## rcm617 (26 September 2012)

Looks like a massive dump of 2,500,000 shares by John Grant on monday to start this drop of about 10% this week.
He must have needed the money in a hurry.


----------



## PortfolioPlus (2 October 2012)

Ves, you said:
"RV - can you list some of the companies that you believe directly compete with DTL? Does not matter if they are not listed."

Whilst they may not be go head to toe as competitors, I always compare these companies: DTL, DWS, ASZ, SMX, IFM and HSN.

Suggestion: Look at the growth in revenue, NPAT and wages as a percentage of revenue and you will see a pattern emerge. I regard DTL as the second in the field.

As an example of how shareholders get shafted by management, check out the growth of wages as a percentage of revenue over 5 years in DWS, a company which many regard as first class.

Porty


----------



## Klogg (2 October 2012)

PortfolioPlus said:


> As an example of how shareholders get shafted by management, check out the growth of wages as a percentage of revenue over 5 years in DWS, a company which many regard as first class.




Are you referring to all wages or the salary of execs within DWS?

If it's all staff in general, I'd argue that I.T. wages have gone nuts over the last 5 years, so there's good reason for that.


----------



## McLovin (2 October 2012)

Klogg said:


> Are you referring to all wages or the salary of execs within DWS?
> 
> If it's all staff in general, I'd argue that I.T. wages have gone nuts over the last 5 years, so there's good reason for that.




Yeah, I agree on this and wages generally. They won't keep rising at the rate they are, IMO. In fact it wouldn't surprise me if they spend a long time flat or even falling in real terms as the mining boom starts to unwind.


----------



## Klogg (2 October 2012)

McLovin said:


> Yeah, I agree on this and wages generally. They won't keep rising at the rate they are, IMO. In fact it wouldn't surprise me if they spend a long time flat or even falling in real terms as the mining boom starts to unwind.




Actually, I.T. wages are growing hugely in Melbourne and Sydney. I look at contract opportunities in Perth and they don't pay as well...

Although it's not widely publicised, I.T. has a huge shortage of qualified individuals (the standard of worker in I.T. is terrible from my experience) and I can't see wages flat-lining anytime soon.

For example, my current client is employing for a senior developer at 120k+super and failing to find anyone... 3-4years ago, 100k would have been enough...


----------



## PortfolioPlus (2 October 2012)

Yep appreciate that wages in IT have increased substantially...more so for some companies than others it seems. DWS is a pretty simple business model.

In FY07, staff took 58.3% of the revenue cake and the shareholders took 26.4%.

By FY12, staff were taking 72% of the revenue cake and shareholders just 16.6%

BUT...over the 5 years, the revenue cake expanded by 73.3%.

Effectively over this time, staff wages increased by 114.1% whereas the poor old shareholders only increased by 9% over the same period.

I find this hard to justify.


----------



## McLovin (2 October 2012)

Klogg said:


> Actually, I.T. wages are growing hugely in Melbourne and Sydney. I look at contract opportunities in Perth and they don't pay as well...




Give it a bit more time...



> AUSTRALIANS should brace for a "white-collar recession" by early next year with the unemployment rate tipped to rise to up to 6 per cent.
> 
> The rise in unemployment is fuelled by redundancies in the financial and IT sectors handed out over the past 18 months, which experts say have so far been hidden from official unemployment figures.
> 
> ...




Read more: http://www.news.com.au/business/wor...rn/story-e6frfm9r-1226486009556#ixzz286rf6ba7


----------



## Klogg (2 October 2012)

McLovin said:


> Give it a bit more time...
> 
> Read more: http://www.news.com.au/business/wor...rn/story-e6frfm9r-1226486009556#ixzz286rf6ba7




Scary...

Reading that, I'm just grateful my contract has been extended until March.


----------



## qldfrog (2 October 2012)

is this surprising anyone?
I am a contractor in IT and it has been open slayer in Brisbane for the last 3 months
As for the implications for DTL, well not worse than the rest of the economy when people will stop listening to JG and opem their eyes: black clouds gathering for a hell of a storm IMHO
But might not be that bad for stockmarket as per previous experience, stocks can boom in a recession


----------



## Klogg (2 October 2012)

qldfrog said:


> is this surprising anyone?
> I am a contractor in IT and it has been open slayer in Brisbane for the last 3 months
> As for the implications for DTL, well not worse than the rest of the economy when people will stop listening to JG and opem their eyes: black clouds gathering for a hell of a storm IMHO
> But might not be that bad for stockmarket as per previous experience, stocks can boom in a recession




I guess having two of the big four banks in Melbourne, along with Telstra, any government redundancies don't really make a big impact - so I can honestly say this has surprised me when talking IT specifically.


----------



## qldfrog (2 October 2012)

Klogg said:


> , any government redundancies don't really make a big impact - so I can honestly say this has surprised me when talking IT specifically.



and crash of mining boom so what is left???


----------



## robusta (2 October 2012)

PortfolioPlus said:


> Ves, you said:
> "RV - can you list some of the companies that you believe directly compete with DTL? Does not matter if they are not listed."
> 
> Whilst they may not be go head to toe as competitors, I always compare these companies: DTL, DWS, ASZ, SMX, IFM and HSN.
> ...




May I ask who do you regard as number one in this field?


----------



## craft (4 October 2012)

qldfrog said:


> I am a contractor in IT and it has been open slayer in Brisbane for the last 3 months
> .
> .
> .
> But might not be that bad for stockmarket as per previous experience, stocks can boom in a recession




Variable cost management


----------



## Ves (4 October 2012)

craft said:


> Variable cost management



It actually took me a while for this concept to start to make sense in terms of DTL. And if you look at some of my other posts in this thread, you can tell I hadn't quite grasped the whole picture.

Basically DTL has lots of variable costs in their business model, which means that they can employ cost control.  This is the reason why their margins are so thin (that and the fact that the core of their business is a distribution model).   In a lot of businesses paper-thin margins are a bad thing, but in this case (if I am right going forward) it simply means that they can sell lower than the competition and still remain profitable.  The product services margins have been at roughly the same level  (obviously with small fluctuations) for near-on a decade by my calculations. If anything this re-inforces my point (and the fact that asset turnover is so high).  It is near on impossible to survive with low margins if you do not have a competitive advantage (in this case cost leadership).

This concept made sense to me after reading about Costco somewhere.

On a second note; it is no secret that there has been speculation about Grant's continued tenure for quite a while now.  He still has 2/3rds of his holdings left in DTL, and the recent sell-off last week, and forgive me for speculating because it does none of us any good, is more likely early retirement planning and diversification of his asset base.

I would also note, that if you do not have enough confidence in DTL retaining the QLD government contract then you probably should not be holding.  It is obviously different if you believe that this would not put their long-term business model in jeopardy.



			
				PortfolioPlus said:
			
		

> Ves, you said:
> "RV - can you list some of the companies that you believe directly compete with DTL? Does not matter if they are not listed."
> 
> Whilst they may not be go head to toe as competitors, I always compare these companies: DTL, DWS, ASZ, SMX, IFM and HSN.
> ...




After reading about some of these companies (in this thread and via their own investor presos) that you mention, I believe that while they are in the same industry, most of them do not directly complete with DTL.


----------



## Ves (31 October 2012)

Fairly major WA contract win today.  Watch this space IMO.  The less and less reliant on those material government contracts that they become, the bigger the moat gets in my opinion.


----------



## robusta (31 October 2012)

Ves said:


> Fairly major WA contract win today.  Watch this space IMO.  The less and less reliant on those material government contracts that they become, the bigger the moat gets in my opinion.




Yeah I know what you mean, this company has me in two minds, I really should buy some more but the prices offered just a few months age and my aversion to averaging up makes me hesitate.


----------



## Ves (31 October 2012)

robusta said:


> Yeah I know what you mean, this company has me in two minds, I really should buy some more but the prices offered just a few months age and my aversion to averaging up makes me hesitate.



Averaging up or down are just tools - your biggest tool is your calculation of intrinsic value.  If you still think it is cheaper than your Iv calculation then that should mean more than any movement of share  (if you are using this method of investing, that is).

There is no point squabbling over a few percentage points for a business that you think is great. Did you know that Warren Buffett almost walked away from the See's Candy deal over $5 million?  Check out how much that business generates all of these years later. He said it would have been one of his very biggest mistakes, if I recall.


----------



## RandR (29 November 2012)

Ves said:


> Averaging up or down are just tools - your biggest tool is your calculation of intrinsic value.  If you still think it is cheaper than your Iv calculation then that should mean more than any movement of share  (if you are using this method of investing, that is).
> 
> There is no point squabbling over a few percentage points for a business that you think is great. Did you know that Warren Buffett almost walked away from the See's Candy deal over $5 million?  Check out how much that business generates all of these years later. He said it would have been one of his very biggest mistakes, if I recall.




mmm, Ive found myself starting to become more comfortable with this business after my initial feelings of 'stay away' due to not understanding the possible effects of technological change with the 'cloud' etc...

Im wondering with the likely departure of a key management figure from within the organisation within the near future, if Im possibly considering the business at the worst time. I really need to see that the management skill is there without Grant. More investigation required. But there not trading at a price point that is unreasonable atm.


----------



## craft (10 December 2012)

RandR said:


> mmm, Ive found myself starting to become more comfortable with this business after my initial feelings of 'stay away' due to not understanding the possible effects of technological change with the 'cloud' etc...
> 
> Im wondering with the likely departure of a key management figure from within the organisation within the near future, if Im possibly considering the business at the worst time. I really need to see that the management skill is there without Grant. More investigation required. But there not trading at a price point that is unreasonable atm.




Hi R&R

What have you heard to think John Grant is leaving? His contract runs until end of 2015.

New Rugby role has the potential to distract him, but the networking benefits, especially within QLD isn't going to hurt DTL.  

Interesting to watch and interesting to see if a successor emerges from within the business. I suspect that succession will be very long winded - DTL is Grants baby and I would imagine he’s going to be on the scenes in some form for a very long time.

Cheers


----------



## RandR (4 January 2013)

craft said:


> Hi R&R
> 
> What have you heard to think John Grant is leaving? His contract runs until end of 2015.
> 
> ...




Nothing substantial craft. just read rumours. sorry about the late reply 

Im just reading the statement of cash flows in the last annual report, Does the company really have 70million of cash in the bank ? Its only got a market value of about 210 million odd. Over 30% in the stock price dollar really cash ? Anybody know if there's a plan to do something with it, acquisitions or return to shareholders ? 

edit - had a quick browse through the notes (note 4) and they have 60million sitting in term deposits with the deposits earning an avg 5.1% in interest ....  + the other 10million sitting as cash at hand .... this seems bonkers for a company with a market cap of only just over 200million thats making money

There's also an epic increase in trade receivables and payables for 2012 in comparison to 2011. I'm going to have to do some further digging into that, anybody else aware of it?


----------



## robusta (4 January 2013)

RandR said:


> There's also an epic increase in trade receivables and payables for 2012 in comparison to 2011. I'm going to have to do some further digging into that, anybody else aware of it?




Think it might be something to do with the lower margin product revenue up 17.5% compared to the higher margin services revenue up only 9.7%.


----------



## robusta (4 January 2013)

RandR said:


> Im just reading the statement of cash flows in the last annual report, Does the company really have 70million of cash in the bank ? Its only got a market value of about 210 million odd. Over 30% in the stock price dollar really cash ? Anybody know if there's a plan to do something with it, acquisitions or return to shareholders ?
> 
> edit - had a quick browse through the notes (note 4) and they have 60million sitting in term deposits with the deposits earning an avg 5.1% in interest ....  + the other 10million sitting as cash at hand .... this seems bonkers for a company with a market cap of only just over 200million thats making money




I'm really not sure why they have so much cash but I am happy they have got it. It is a sign of good cash flow and conservative management, also a nice buffer if thew want to buy something small to medium size without diluting existing shareholders.

The other thought is maybe Microsoft, Oracle and their ilk require capital guarantees if you want to run up a few hundred million on account.


----------



## Ves (5 January 2013)

Look at the balance sheet - it is clearly bloated.  Average cash for the year is much, much lower than the year-end balance.  It cannot be distributed because they need that cash for running the business (ie. working capital).

Cash flow in the second half is always stronger.  The cash will get soaked up in the first half of 2013 just like it always has.


----------



## RandR (5 January 2013)

Ves said:


> Look at the balance sheet - it is clearly bloated.  Average cash for the year is much, much lower than the year-end balance.  It cannot be distributed because they need that cash for running the business (ie. working capital).
> 
> Cash flow in the second half is always stronger.  The cash will get soaked up in the first half of 2013 just like it always has.




Ah, so basically they receive the vast majority of the money in june each year ? Then have to try to run the businesss on the smell of an oily rag until the next hit of funny money next june? Makes it quite difficult to know the effect of the economic environment upon the business until the end of the financial year.


----------



## Ves (5 January 2013)

RandR said:


> Ah, so basically they receive the vast majority of the money in june each year ?



What makes you think that this is the case?


----------



## RandR (5 January 2013)

Ves said:


> What makes you think that this is the case?




"*As usual *the operating cash flow and year-end cash balance were boosted by the temporary cash surplus arising from the timing of receipts and payments around 30 June, with the* traditional May/June sales peak*".

"Due to the cash flow seasonality around 30 June".

Lifted from page 9 of annual report 2012.

I think its a credit to the business that if cashflow is so lumped in 1 or 2 months they still go through a 12 month period with minimal to no use of debt and fund operations entirely off the cashflow generated, put in a similar lumpy cashflow position the majority of business would need to rely heavily on debt.

Im curious to know why theres a sudden rush of expenditure on IT hardware every May June. Is it a case of people just rushing to spend the remainder of their budget before they lose it ?


----------



## Knobby22 (7 January 2013)

RandR said:


> Im curious to know why theres a sudden rush of expenditure on IT hardware every May June. Is it a case of people just rushing to spend the remainder of their budget before they lose it ?




It's a few factors.
(1) In provate business, best to spend before June 30 as can reduce GST payments.
(2) In public enterprise, usually projects are defined via the financial year and often upgrade contracts are only awarded after a long consultation in February- March leaving only a few months to get the works done.


----------



## Out Too Soon (30 January 2013)

ASF seems to be getting quieter, ASF needs contributors not just browsers. :frown:

Anyway DTL is trending nicely with bumps for good trading opportunities


----------



## Knobby22 (30 January 2013)

It has sort of flatlined. The market has rose quite a bit but this company has been stabilising.
Probably good as a new base will allow a future large jump in price. I doubt the jump will occur before May.


----------



## robusta (30 January 2013)

Out Too Soon said:


> ASF seems to be getting quieter, ASF needs contributors not just browsers. :frown:
> 
> Anyway DTL is trending nicely with bumps for good trading opportunities
> 
> View attachment 50688




We all trade with different criteria and time frames but to me the best time to buy was when the price was trending sideways around the $1.00 mark - and hold to collect the nice dividend yield.


----------



## robusta (20 February 2013)

Results out today, the results presentation is often interesting.

http://www.brrmedia.com/event/109827/john-grant-managing-director


----------



## Ves (20 February 2013)

Pretty ordinary result really - profitability has fallen into a rut over the last few periods. There was however ome gross margin improvement this period. Cost control is still an issue. They seem to be carrying extra costs and the market curve isn't agreeing with them at the moment.


----------



## RandR (21 February 2013)

Ves said:


> Pretty ordinary result really - profitability has fallen into a rut over the last few periods. There was however ome gross margin improvement this period. Cost control is still an issue. They seem to be carrying extra costs and the market curve isn't agreeing with them at the moment.




Margin only improved due to the increase in service work and decrease in the lower margin 'product' supply. I saw mention of a change from receiving payments for work from in advance annually now to monthly in arrears. I wonder if this is going to have much of an impact on cashflow and the seasonality of it. I think the fact that they negotiate most contracts around february-march yet dont see 90%of earnings until june-july make it almost impossible to reasonably predict full year results at this point. hence management providing no real forecast other then. we expect conditions in 2013 to be similar to 2012.


----------



## robusta (2 April 2013)

Link to a article by Tony Featherstone in The Bull.

http://www.thebull.com.au/premium/a/36507-watch-this-tech-stock.html


----------



## robusta (16 May 2013)

Data#3 presentation to Goldman Sachs Emerging Companies Conference

http://www.asx.com.au/asxpdf/20130516/pdf/42fxqhtxmt86p4.pdf


----------



## fanger (18 May 2013)

Now only if the share price would move higher, hasn't really does much over the recent rally in the last 8 months.


----------



## Klogg (18 May 2013)

fanger said:


> Now only if the share price would move higher, hasn't really does much over the recent rally in the last 8 months.




IT services stocks in general haven't done much...
SMX is down, DWS flat, DTL flat, OKN flat (even with share buybacks).

Even though I own DWS and not DTL, this one is the pick of the bunch... Just waiting for the right price


----------



## RandR (22 June 2013)

I really thought after the trading update this would be hit a little more then it has. I am curious with all the sacking of QLD IT public service if it will lead to opportunities for companies like Data 3 to increase their 'service and support' presence and lead to tighter business relationships with the public sector. I am not convinced this will be the case but watching this space. In the words of one of the former state IT workers I have spoken with "they have been getting rid of all of the doers and only keeping the thinkers and planners".

 This is the critical month of the year for Data 3 success and it wasn't at all surprising to see the lower profit target come through. I actually think IT hardware spending should be quite cyclical though, not just as a result of the business environment but also due to the introduction of new hardware technology and software. I'm not sure if this technology and hence revenue/profitability cycle assumption holds true to these sorts of firms going back into the past, but probably worthwhile investigating.


----------



## fanger (23 August 2013)

What did everyone think on dtl's report?


----------



## craft (23 August 2013)

fanger said:


> What did everyone think on dtl's report?




What did you think?


----------



## Country Lad (24 August 2013)

fanger said:


> What did everyone think on dtl's report?




Overly verbose.


----------



## galumay (24 August 2013)

Country Lad said:


> Overly verbose.




Also not enough pictures.


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## Ves (24 August 2013)

fanger said:


> What did everyone think on dtl's report?



More of the same for me.   The company has lost momentum since the 2011 results.   

Cost control is still an issue -  they are still carrying excess costs in the hope of an industry turn around,  but still no signs of improvement.  However,  it does show that this business is resilient and has the cash flow to achieve something like this without putting a massive dent in the excess returns above cost of capital.

It is still ringing short term pain for long term gain in my ears,  and there is a tremendous amount of internal financial leverage that will make this company look very good when the conditions in the industry swing back to growth.

However,  all of this being said, there does become a time when carrying excess costs will start to make investors very impatient over an extended period of time.

I would not be holding if you expect returns on your investment in the next 18-24 months.

The report didn't impress me much - but no massive red flags.


----------



## fanger (27 August 2013)

craft said:


> What did you think?




Slightly disappointing, Revenue flat, Npat down, costs up also ROE declining, hoping for an improving earning down the line. Dividend remaining the same is good.


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## VSntchr (13 November 2013)

Ves said:


> It is still ringing short term pain for long term gain in my ears,  and there is a tremendous amount of internal financial leverage tha*t will make this company look very good when the conditions in the industry swing back to growth.*




One point that I don't have much of an insight into - yet it is a factor to consider for IT companies, is something that ROE mentioned in a seperate thread. It was to do with the structural shift of domestic employment/contracting to overseas outsourcing for IT work/projects. As I beleive he works in the IT industry it is a very valid opinion and perhaps if he reads this he could shed some more light on the topic.
Whilst I have yet to make my own decision on the topic, I have Buffet's words ringing in my ears when he talks about 'new norms' rarely bearing true.
For DTL specifically, service revenue is only 16% of total rev, and its actually product rev which has been causing the problems, service rev is growing nicely...so perhaps its not an issue at this stage...
From a valuation perspective I think its looking okay - but as you have pointed out, its obviously going nowhere fast in the near-term. This leaves me with plenty of time to keep analysing and forming my opinion. The yield should offer some support to the share price unless earnings capitulate and management fails to reach the 2/3rd split in the second half...which may result in the div being cut..


----------



## Ves (13 November 2013)

VSntchr said:


> One point that I don't have much of an insight into - yet it is a factor to consider for IT companies, is something that ROE mentioned in a seperate thread. It was to do with the structural shift of domestic employment/contracting to overseas outsourcing for IT work/projects. As I beleive he works in the IT industry it is a very valid opinion and perhaps if he reads this he could shed some more light on the topic.



I don't see how this will affect DTL.    Their core revenue is from the software / hardware distribution business  (in which my analysis tells me that they are a cost leader)  that operates in its own well entrenched distribution channel in Australia.   The main value driver for their customers in their business is that they simplify technology and make it an enabler in their clients business.   They save their clients money in the long run by making technology an efficient and integrated process.   DTL's customers are outsourcing their IT already - to companies like DTL.   But can they outsource DTL's core function to an overseas based department when it is often done on-premises and requires communication and planning? 




> Whilst I have yet to make my own decision on the topic, I have Buffet's words ringing in my ears when he talks about 'new norms' rarely bearing true.
> For DTL specifically, service revenue is only 16% of total rev, and its actually product rev which has been causing the problems, service rev is growing nicely...so perhaps its not an issue at this stage...
> From a valuation perspective I think its looking okay - but as you have pointed out, its obviously going nowhere fast in the near-term. This leaves me with plenty of time to keep analysing and forming my opinion. The yield should offer some support to the share price unless earnings capitulate and management fails to reach the 2/3rd split in the second half...which may result in the div being cut..




Currently technology is seeing another "Disruptor" appear in the form of Cloud / Big Data and it is gaining traction faster than initially thought by the industry insiders.     Disruptors provide risk to the revenue lines of those who are involved in the sale /  integration of technology - in the short-term because the market becomes uncertain of IT spend in relation to current developments ("do we continue with the old or move to the new?") and hence they often delay decision making and in the long-term for those who are not able to adjust their sales / services models to integrate the new technology (history is littered with plenty of examples ie. Blackberry).

DTL's core business is based on creating value from technology and especially from the innovation of technology - therefore my opinion (DYOR) is that I believe that their business has benefited immensely from the continuous appearance of technology disruptors in the last 10-15 years and that they are well placed to continue this trend well into the future.   The balance sheet is still solid and most of the indicators still compare very favourably compared to the rest of the Australian industry. They are well positioned to respond to any uptick in business conditions,  and they've already been spending to gain traction from this (see internal cost measures rising).

As I said previously don't expect big gains in the short-mid term - this is a long term hold and you will not know whether you are right or wrong for a long time yet.


----------



## Toppy (13 November 2013)

It seems the company, like most in the field, persists to a notable extent on government contracts and is sensitive to public sector cutbacks. With most states and the Commonwealth in deficit (and now under conservative governments), and particularly the federal bureaucracy experiencing budget freezes and a raised efficiency dividend next year, is it not the case that Data#3 will face serious revenue if not margin challenges? And whether those challenges are short/medium/long term depends on the duration of the austerity? Given the structural problems in the budget, increasing unemployment, increasing ageing, etc, I cannot see government expenditure* stabilising or increasing in the foreseeable future (and, of course, that impacts private sector expenditure also).

* on non-essentials like IT upgrades

_The above is simply my opinion_


----------



## fanger (14 November 2013)

I sold out around 1.18 but I'm looking to get back in. If I can get back in around a dollar I'll be happy with that.


----------



## McCoy Pauley (15 November 2013)

VSntchr said:


> One point that I don't have much of an insight into - yet it is a factor to consider for IT companies, is something that ROE mentioned in a seperate thread. It was to do with the structural shift of domestic employment/contracting to overseas outsourcing for IT work/projects. As I beleive he works in the IT industry it is a very valid opinion and perhaps if he reads this he could shed some more light on the topic.
> Whilst I have yet to make my own decision on the topic, I have Buffet's words ringing in my ears when he talks about 'new norms' rarely bearing true.
> For DTL specifically, service revenue is only 16% of total rev, and its actually product rev which has been causing the problems, service rev is growing nicely...so perhaps its not an issue at this stage...
> From a valuation perspective I think its looking okay - but as you have pointed out, its obviously going nowhere fast in the near-term. This leaves me with plenty of time to keep analysing and forming my opinion. The yield should offer some support to the share price unless earnings capitulate and management fails to reach the 2/3rd split in the second half...which may result in the div being cut..




I know the general counsel at one of the listed IT consultants (not DTL) and he told me more than 12 months ago that they chose to heavily scale back their outsourcing to India because it wasn't providing the same level of customer service as their Australian operations could provide their clients, and the cost savings weren't sufficiently high enough to justify the switch.


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## robusta (20 December 2013)

Profit downgrade today, following UXC the other day.

http://www.asx.com.au/asxpdf/20131220/pdf/42lrn2dbj90h2p.pdf

Seems conditions are still tough in this sector, however with nice recurring revenues and no debt I was happy to top up my holding at $0.93 today and collect the 7% plus dividend yield.


----------



## skc (20 December 2013)

robusta said:


> Profit downgrade today, following UXC the other day.
> 
> http://www.asx.com.au/asxpdf/20131220/pdf/42lrn2dbj90h2p.pdf
> 
> Seems conditions are still tough in this sector, however with nice recurring revenues and no debt I was happy to top up my holding at $0.93 today and collect the 7% plus dividend yield.




Are you sure the dividend is sustainable given the reduced profit outlook?

H1 PBT is only $3.5-4m (vs 9.8m last year)... that's a major downgrade. They said full year profit is 33:66 split for H1 and H2 (they have not explicitly confirm or revise that). So full year PBT may only be $10m, or NPAT ~$7m, or EPS ~4.5c.

Historically they've been paying out 80% of NPAT. So on this guidance it may be too much to expect a dividend of 7c like last year?

I am surprised that the share hasn't fallen more on the back of this.


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## Ves (20 December 2013)

I'm glad I don't have a concentrated portfolio on days like today....   EAX downgrade,  now DTL.   Didn't so much expect the first,   but from my previous posts on DTL you probably see that I was expecting weakness for the short and medium term earnings.

There's not really much to add,  most the top-line revenue uncertainty is still in the second half.


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## ROE (20 December 2013)

IT companies I reckon will face the same pressure as mining service company.
Governments and Companies will focus on cost cutting.

With Federal and States has a pile of debt and growing, I cant see them splash too much cash on IT spending.

I don't have any of the IT service companies for some reason it isn't attractive to me unless
you are a software producer with high switching cost and patents like IRE


----------



## craft (20 January 2014)

ROE said:


> IT companies I reckon will face the same pressure as mining service company.
> Governments and Companies will focus on cost cutting.
> 
> With Federal and States has a pile of debt and growing, I cant see them splash too much cash on IT spending.
> ...




Cost cutting only goes so far – eventually even our politician will realise the only sustainable way forward is efficiency and productivity, the very essence of what technology offers. The actual software will evolve as will the methods of delivery but DTL has a competitive position and niche experience in cost effectively delivering productivity enhancing tools. 

The next half results are shaping up as pivotal. A further delay in IT investment will see price smacked as DTL has effectively called the bottom with its second half forecast whilst the market seems to be doubting it. For me it’s a 50/50 call on IT investment cycle timing. I hope it’s delayed and DTL is offered at a real bargain – but with only a 50% probability of this happening I have been adding a few at these levels because the price stacks up on my assumptions for a long term investment.  

Investment cycles are expected within my time frame and this one has not diminished my view on DTL in any way, neither has a change in delivery method to greater cloud utilisation.


----------



## Ves (20 January 2014)

Hi craft - sums it up pretty well for me.   I've been buying a few as well.  It's interesting to note that for anyone buying around $1.10ish in the last few years that the dividend stream has so far mitigated any (paper) capital loss.   Those who benefit from franking credits are still in front - probably not the end of the world if you're riding out the investment cycle for long term results.

I remember you saying it in another thread about the GFC and your biggest fears were right near the bottom (ie "what does everyone know that I don't?"),  it is starting to look like that with DTL based on long-term projections and a new investment cycle looming. Near term it probably looks like an absolute mess to a lot of others.


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## VSntchr (21 January 2014)

Ves said:


> I remember you saying it in another thread about the GFC and your biggest fears were right near the bottom (ie "what does everyone know that I don't?"),  it is starting to look like that with DTL based on long-term projections and a new investment cycle looming. Near term it probably looks like an absolute mess to a lot of others.





As a non-holder of DTL this statement is also very interesting to me and reflects how I have been feeling with DTL. As the price has slowly been dropping from $1.20 I have been getting more and more interested and spending more time researching. I would have began accumulation already if I had spare funds - I have just needed them elsewhere thus far.

DTL could prove to be a good example of not needing a GFC to get GFC like prices. As always, if it happens...it will seem glaringly obvious looking back.

SMX and the newly formed RXP are other IT's that I'm watching closely.


----------



## Ves (21 January 2014)

VSntchr said:


> SMX and the newly formed RXP are other IT's that I'm watching closely.



I've had a brief look at both of those (that said,  I probably know SMX a little better than RXP).  RXP is often referred to as a mini-SMX.

SMX used a roll-up / acquisition strategy to reach it's current scale,  and it looks like they will continue to do much of the same in the short-medium term. They've done it really well, in fact.   I think they've made it look a hell of a lot easier than it really is in reality. Of course, it looks great on the way up,   but often the skeletons in the closet and the inefficiencies aren't seen until an economic downturn / slowing investment cycle hits.  It can still work and some IT consultancies they've bought no doubt perform better as part of a larger jigsaw puzzle.  But each time they're making an acquisition they are betting in the long-term that they can run the operation more efficiently on the multiple paid than the previous owner could.  There's also "key personnel" and "legacy" issues...  but there are on the flip side the benefits of these practices being very capital light, people orientated business, which means they have quite a bit of operational leverage.  Also watch out for revenue concentration / big contracts and the need to for consultancies to win those make or break contracts from big blue chip clients for which everyone else is also fighting.

I like DTL because it grows organically...  in part this really helps it control as much of its own destiny as possible.


----------



## VSntchr (21 January 2014)

Ves said:


> but there are on the flip side the benefits of these practices being very capital light, people orientated business, which means they have quite a bit of operational leverage.



I see the benefit of having a flexible cost structure, i.e. letting go contractors if work dries up ..but doesn't the above describe the opposite of operational leverage?



> I like DTL because it grows organically...  in part this really helps it control as much of its own destiny as possible.



Yep. I agree.
Not to be ignored however, is the advantage of the roll-up (as it's been discussed in other threads) that has to do with the quirk of the market that allows listed companies to buy unlisted companies at say 3-5x EBITDA and then have them instantly valued at 8+x EBITDA...assuming that the music doesn't stop and the acquisitions integrate well...it is real value-add for shareholders.. 

I would certainly prefer the DTL type business that grows organically. Far less risk, easier to sleep at night. But if certain conditions present themselves, allowing a roll-up to be purchased at a significant discount to my perceived valuation of the company - then I think as investors its in our best interests to assess the opportunity.


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## Ves (21 January 2014)

VSntchr said:


> I see the benefit of having a flexible cost structure, i.e. letting go contractors if work dries up ..but doesn't the above describe the opposite of operational leverage?



Could be the wrong word.   Basically at the bottom of the investment cycle staff productivity and asset utilisation are at their lowest.  This will pick up when the investment cycle picks up and the earnings will reflect that. Some times variable costs are hard to actually shed... because if you pull the trigger at the wrong time you miss the wrong cycle and start behind in the race against those who did not.  DTL talk about "carry costs" a lot,  that's most likely why they've doing this,  they are waiting to pounce on the uptick of the market.  DTL have been investing ahead of the curve for the last few years now.


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## VSntchr (21 January 2014)

Yeah, good points.
Just to add to your statement, the latest report reads:

"In our products segment, the cost ratio increased from 
65.6% to 68.6% and in services from 83.0% to 83.9% as we 
consciously accepted lower levels of utilisation in return for 
maintaining capacity and capability."


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## VSntchr (19 February 2014)

Very informative BRR presentation by Data 3 today.

One thing that I thought was interesting was the concept of risk sharing that John was talking about.
He elaborated by saying that DTL was venturing into business performance.

Would this be in contrast to how some have described DTL in the past as different to the listed peers such as SMX, DWS etc as DTL has traditionally focused on IT infrastructure and solutions rather than the business analytics side of things?


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## McLovin (19 February 2014)

Ves said:


> Could be the wrong word.   Basically at the bottom of the investment cycle staff productivity and asset utilisation are at their lowest.  This will pick up when the investment cycle picks up and the earnings will reflect that. Some times variable costs are hard to actually shed... because if you pull the trigger at the wrong time you miss the wrong cycle and start behind in the race against those who did not.  DTL talk about "carry costs" a lot,  that's most likely why they've doing this,  they are waiting to pounce on the uptick of the market.  DTL have been investing ahead of the curve for the last few years now.




This came up again in the prezzo today. Grant acknowledged they are carrying staff in anticipation of when things start to turn (he sounded cautiously optimistic that the worst may have passed). Personally, I think it's a very prudent strategy, especially as these IT companies are constantly talking about how hard it is to recruit the right people. A best of breed business should have assets (people and equipment) ready to go when business picks up.

I really like the transparency of the management at DTL. Straight shooters.


----------



## Klogg (19 February 2014)

McLovin said:


> Personally, I think it's a very prudent strategy, especially as these IT companies are constantly talking about how hard it is to recruit the right people. A best of breed business should have assets (people and equipment) ready to go when business picks up.




That's actually a great attitude to have, and is a definite positive for management... I'm interviewing applicants for three roles (testing and development) and it's a pain in the a$$ to find anyone who even knows the basics! (Unless you offer contract rates slightly above market)

Might have to go and steal them from the Data#3 offices, haha.


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## craft (19 February 2014)

McLovin said:


> This came up again in the prezzo today. Grant acknowledged they are carrying staff in anticipation of when things start to turn (he sounded cautiously optimistic that the worst may have passed). Personally, I think it's a very prudent strategy, especially as these IT companies are constantly talking about how hard it is to recruit the right people. A best of breed business should have assets (people and equipment) ready to go when business picks up.
> 
> I really like the transparency of the management at DTL. Straight shooters.




I really like companies with the balance sheet strength and management fortitude to suffer short term pain for long term gain. And the best bit is the majority of the market that are fixated on short term gratification hates it. The combination adds up to quality companies at reasonable prices. 

MMS is another that showed this capacity by carrying all their staff through recent turmoil.


----------



## Ves (19 February 2014)

craft said:


> I really like companies with the balance sheet strength and management fortitude to suffer short term pain for long term gain. And the best bit is the majority of the market that are fixated on short term gratification hates it. The combination adds up to quality companies at reasonable prices.



Psychologically it would appear that most people find it harder to forecast growth in a company that has been going through a rough patch profitability wise,  especially when it extends over multiple reporting periods.

The same can be seen in a bear market or a recession "what if it never ends?"

On the other hand,  something that has already started to grow earnings at a rapid clip, seems to be the exact opposite and sensational share price rallies and very optimistic opinions are not uncommon.


----------



## McLovin (20 February 2014)

Ves said:


> Psychologically it would appear that most people find it harder to forecast growth in a company that has been going through a rough patch profitability wise,  especially when it extends over multiple reporting periods.
> 
> The same can be seen in a bear market or a recession "what if it never ends?"
> 
> On the other hand,  something that has already started to grow earnings at a rapid clip, seems to be the exact opposite and sensational share price rallies and very optimistic opinions are not uncommon.




I actually think it is more likely to do with most people (and I'd include most fund managers in that) not understanding the business cycle. Guys like our old mate Roger cr@p on about value investing blah blah blah, but all they're really doing is riding earnings momentum and as soon as it shows signs of stopping they sell. Even his forumla assumes that as it is now so it will always be. Which logically means you undervalue at the bottom and overvalue at the top. I don't even think you need to be a whiz at forecasting growth (I sure as hell ain't), just don't let your emotions get the better of you and have some faith that every works in cycles. It probably doesn't hurt to be an optimist either!


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## VSntchr (20 February 2014)

McLovin said:


> I actually think it is more likely to do with most people (and I'd include most fund managers in that) not understanding the business cycle. Guys like our old mate Roger cr@p on about value investing blah blah blah, but all they're really doing is riding earnings momentum and as soon as it shows signs of stopping they sell. Even his forumla assumes that as it is now so it will always be. Which logically means you undervalue at the bottom and overvalue at the top. I don't even think you need to be a whiz at forecasting growth (I sure as hell ain't), just don't let your emotions get the better of you and have some faith that every works in cycles. It probably doesn't hurt to be an optimist either!




Some good comments there, and from you too Ves.
It's funny that the market is pushing new recent highs, yet a few of the stocks I follow closely are near recent lows. Your comments around cycles have been (pardon the pun) cycling in my head the last few days and have really helped when spending time analysing these companies. 

I've fired my first round of ammunition at DTL as of today..with another 3 or 4 bullets left in the gun for the next couple of weeks/months. 

Now I've just got to go home and get back to praying that it isnt different this time


----------



## Klogg (20 February 2014)

I've been pondering the cycle talk that has been going on and am trying to figure out at what point I should be comfortable that this particular cycle is near the 'bottom'... 

I noted that Ves made reference to asset utilisation and number of staff, as did John Grant when he mentioned additional staff with varying skill-sets in some offices. So, on that note I compiled some very basic data on NPAT and Equity for DTL, DWS and SMX, with the ultimate aim to show Return on Equity (closest thing to Asset Utilisation I could think of) as shown in the table below:





A few things worth noting before I continue:

I couldn't find data older than 2005 for most. If you know where to get this, please do tell!
SMX is a slightly different story, as they grew via acquisition rather than organically (as is reflected by the intangibles on the balance sheet)
DWS have also made acquisitions, but it was the most relevant comparison I could find
As listed in the notes, there is an adjustment in 2006 for DWS for an Equity payment made. I took 'normalised' NPAT
2014 Half Year results can't really be used for this purpose - I only listed them for the sake of completeness

_*Edit: I'm not comparing ROE between companies, simply the trend over the years for each. I chose three in-case there were any outlier results for one single company that threw out my analysis._

Now, to see if there was a trend at all, I decided to graph it:




Unfortunately, this has shown me one of three things... 

I'm failing to see a cycle in this time-frame
There is no cycle in this time-frame
OR, I'm looking in the wrong spot for the answer I'm after (because my link between ROE and Asset Utilisation was based on a flawed assumption)

In conclusion, this exercise hasn't really helped me... Could anyone tell me if I'm in fact looking at the correct data (in terms of time-frame or data type) for the answer on the cycle 'bottoming'?

Apologies for the long post, but I thought I'd give it a crack instead of being spoon-fed the answer... 
And thanks in advance.


----------



## Klogg (20 February 2014)

Another edit - should've used ROC, but in this case the companies have no material debt so ROE will suffice.


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## craft (20 February 2014)

Hi Klogg
To me cycles are a concept of how volatility in Revenue, Asset Utilisation and Margin play out on operational/financial leverage. It’s not something that necessarily shows up as a sound wave pattern in the historical financials.

DTLs early  ROE’s should be taken in context of a much smaller and less mature company.


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## Klogg (20 February 2014)

craft said:


> Hi Klogg
> To me cycles are a concept of how volatility in Revenue, Asset Utilisation and Margin play out on operational/financial leverage. It’s not something that necessarily shows up as a sound wave pattern in the historical financials.




Perfect, this gives me something to build an understanding from! As usual, you come through with the goods - Thanks craft! 

...and I really should slap myself for what I just did. I searched everywhere EXCEPT the damn ASX website for previous annual reports.   

Anyway, I'll go off and do a little more research. Thanks again.


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## Ves (20 February 2014)

Hi Klogg,

I also use Asset Turnover ratios to measure asset utilisation.  In this case you are measuring how many dollars of revenue the company can generate per dollar of assets.   It's just revenue / total assets.

You can also look at internal cost ratios, these will indicate that there is a cost management issue, margin pressure or they are carrying costs  (ie.  they are not utilising their staff at peak efficiency and waiting for an uptick).  Sometimes it could be a mixture of these factors.

Employee expense ratios etc are also good for people based businesses.

I also use EBIT and EBITDA margins over time.  And these are clearly falling for all of these IT companies since the GFC.  But remember that SMX / OKN / DWS etc are slightly different in nature,  they are more managed services companies,  and DTL is more of a product & operational efficiency type business. So the cycles may peak at slightly different times.

Internal financial leverage is also handy,  we discussed how to calculate this in the Present Value of Future Cash Flows thread  (I remember making myself look silly by doing it long hand!).

I agree with craft.  I think how these all fit together in the big picture is gives you a good indication - but business cycles aren't an exact science they're not going to fit perfectly on a graph or chart, especially not with a single ratio I don't think.   But generally when most of the companies in the industry start declining in profitability you know it's on the way down.  

Just remember for DTL the 2011 result was way above trend, so it's a bit of an outlier and may or may not distort the picture.


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## VSntchr (6 March 2014)

Interesting to see the updates to Gartners hype charts which were referenced in the 2010 AGM letter (thanks craft for highlighting this letter earlier in the thread).

2012

2013
(sorry couldn't find a chart for this one.


These charts should have been shown to anyone purchasing any tech stock without earnings (so any tech stock) back in 1999


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## VSntchr (17 March 2014)

Really getting punished over the last few days and a bit of a gap down to 0.63. Managed to catch a few at 0.635..however I wouldn't be suprised if it keeps going lower for a bit..

The further it falls the more relevant craft's earlier statement becomes, "what does the market know, that I don't".


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## McLovin (17 March 2014)

VSntchr said:


> Really getting punished over the last few days and a bit of a gap down to 0.63. Managed to catch a few at 0.635..however I wouldn't be suprised if it keeps going lower for a bit..
> 
> The further it falls the more relevant craft's earlier statement becomes, "what does the market know, that I don't".




There was interesting blog on Bronte a few weeks ago about share prices. Basically, that a share price needs a group of investors/traders to be supporting it, and the bits inbetween are where you can find "bargains". Seems rather relevant to what is happening to DTL...



> The growth investors will hold a stock as long as the rate of revenue growth does not slow. When it slows they dump - and the shares of really fine companies can fall sharply because the growth rate falls from (say) high single digit to mid single digit. What are objectively great results can see 25 percent price falls simply because the results do not measure up to the expectations of the shareholder base.
> 
> The growth investors don't much care about earnings (they come later). But they do care how big the eventual market becomes.
> 
> ...




http://brontecapital.blogspot.com.au/2014/02/blue-nile-and-marc-andreesens-theory-of.html

Every now and then quality companies, especially small cap ones, have these sort of shakeouts.


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## fanger (17 March 2014)

I picked some up at 67 cents. I think its being over punished but time will time if its been a good buy or not.


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## Huskar (18 March 2014)

DTL, UXC and SMX all at 52 week lows. 

Perhaps a perception that the shift to cloud computing will have more lasting impact on these businesses?


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## ROE (18 March 2014)

Could this be someone seeing a bigger trend that some people may not pay attention to.
IBM been laying off a lot of IT staff in Australia because there isn't much work around and their IT outsourcing revenue is in decline, they look to restructure and shake up a bit and you guess where their focus is CLOUD ...they looking of getting rid or do with a very small IT outsourcing arm

If this happen to IBM could that mean smaller companies write down and decline revenue are next?


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## Klogg (18 March 2014)

ROE said:


> Could this be someone seeing a bigger trend that some people may not pay attention to.
> IBM been laying off a lot of IT staff in Australia because there isn't much work around and their IT outsourcing revenue is in decline, they look to restructure and shake up a bit and you guess where their focus is CLOUD ...they looking of getting rid or do with a very small IT outsourcing arm
> 
> If this happen to IBM could that mean smaller companies write down and decline revenue are next?




Smaller companies that were growing at a much faster rate than IBM have already taken a hit to revenues and margins. DWS, SMX, ASZ, DTL all included - and I acknowledge some of these aren't big on IaaS.

That's not to say that it may not continue for a while, but the small caps are in line, if not ahead of larger companies, as it's easier for them to make appropriate restructures... AND their service is much better than IBMs (I work directly with them, their cloud offering is horrible).

Even Gartner agree with me:
http://www.nvizor.com/?attachment_id=1676


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## ROE (18 March 2014)

Klogg said:


> Smaller companies that were growing at a much faster rate than IBM have already taken a hit to revenues and margins. DWS, SMX, ASZ, DTL all included - and I acknowledge some of these aren't big on IaaS.
> 
> That's not to say that it may not continue for a while, but the small caps are in line, if not ahead of larger companies, as it's easier for them to make appropriate restructures... AND their service is much better than IBMs (I work directly with them, their cloud offering is horrible).
> 
> ...




IT is where the best products may not win you work ...sales and marketing power and lobbying is bigger than technology...as long as it works it doesn't have to be the best but if you have a powerful sale force and marketing
A second best products can beat the best ....

That the secret of Microsoft success, their product isn't the best but their secret weapons is sales force and marketing....windows was horrible in their early day compared to macs and unix...
 don't under estimate IBM sale force and lobbying influences ...if they can't get a deal with that sort of lobbying power behind it I find it hard for a smaller firm to do the same...

Anyway I just play devil advocate as I don't invest in these business so I don't know much about them but I do know a lot about IT contracts and business dealing that why it never attract me


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## herzy (20 March 2014)

ROE said:


> If this happen to IBM could that mean smaller companies write down and decline revenue are next?




Not all smaller companies. ASZ has had cash flow issues in the last few years, but have been positioning themselves heavily on cloud computing... Perhaps they're finally well positioned and going to see a bit of a turn-around?


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## ftw129 (20 March 2014)

Probably stating the obvious here but this stock broke a 13 year trend (back in October) that started back in 2001 and the recent break below major support of 90 cents is extremely bearish for the short to medium term.

The stock should find some support in the very short term at 50-60 cents. Should it have a decent bounce, it is highly unlikely the stock will be able to break back above 90 cents. This level will prove to be heavy resistance for a significant amount of time however if it does manage to break back above 90 cents then it will find even stronger resistance at the long term up trend line that it broke in October.

Caution. Should it not find support at around 50-60 cents then it's next level of support is 30-40 cents with a potential sell off down to levels that it has not seen since 2001.

If anyone is waiting to buy this stock you want to see it stabilise at one of the support levels mentioned for a period of time and wait for it to form a higher low. This will then be confirmation of a possible new up trend.

At this point in time there is nothing to indicate it is safe to enter a long position. 

This looks like it's going to be a good "traders" stock for those confident enough to buy at support and sell at resistance but the trend for the short to medium term is bearish and volatile.

I will save this thread and should I see the right conditions to go long I'll post my thoughts with a potential price target.

Of course, this is just my opinion and should not be taken as a recommendation. You do so at your own risk.


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## VSntchr (17 April 2014)

IBM reported its 8th quarterly fall in revenue in a row last night...and hardware sales were again very weak.

DTL is leading the asx IT sector down as a result, certainly did not think I would be seeing this with a 5 in front of it so soon!

Those clouds are getting mighty dark.


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## fanger (18 April 2014)

VSntchr said:


> IBM reported its 8th quarterly fall in revenue in a row last night...and hardware sales were again very weak.
> 
> DTL is leading the asx IT sector down as a result, certainly did not think I would be seeing this with a 5 in front of it so soon!
> 
> Those clouds are getting mighty dark.




I know everyone is all doom and gloom at the moment but do you honestly believe earnings have dropped 60%
in line with the share price. I think there is a bit to much over pessimism in this sector in general.


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## ROE (18 April 2014)

fanger said:


> I know everyone is all doom and gloom at the moment but do you honestly believe earnings have dropped 60%
> in line with the share price. I think there is a bit to much over pessimism in this sector in general.




IT service is similar to mining services, you have high cost based, very high personnel cost when the 
good time rock on you dont see it, when revenue slow you see big drop in profit.

And when time is tough business do exactly like what BHP and RIO do cut back on IT spending and only run core services... New projects and stuff will be put on ice, small guys with high debt is the first to go, the strong one may linger but not making much etc...


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## Ves (18 April 2014)

ROE said:


> IT service is similar to mining services, you have high cost based, very high personnel cost when the
> good time rock on you dont see it, when revenue slow you see big drop in profit.



Hmmm,   I tend to see a whole heap of potential for variable cost management in people businesses than mining services stocks that are more likely to have heaps of idle equipment (that either sits at low utilisation or needs to be sold to pay out leasing commitments).

At the end of the day those with the lowest cost base will win out because they can cut the most fat when times are bad and be able to run at lower margins.

DTL isn't a high margin business,   it's profitability comes from high asset utilization and internal financial leverage versus its peers.   The main part of their business runs between 2-4% EBIT margin over the whole cycle.  

Still holding,  and haven't changed my views.


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## fanger (18 April 2014)

ROE said:


> IT service is similar to mining services, you have high cost based, very high personnel cost when the
> good time rock on you dont see it, when revenue slow you see big drop in profit.
> 
> And when time is tough business do exactly like what BHP and RIO do cut back on IT spending and only run core services... New projects and stuff will be put on ice, small guys with high debt is the first to go, the strong one may linger but not making much etc...




Except there is a cyclical upturn in building and other parts of the economy who use dtl's services. Yes mining has come off the boil and is cutting capex but the rest of the economy is picking up bar the manufacturing sector.


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## qldfrog (18 April 2014)

I do not see what positive  the purchase of IP by SMSF and chinese investors can have for data3?
SUre john and Peter trademens in their ute can do a bit of renovation before/post purchase and a few more units are being built to add to the already bulging stock but really, DTL profiting from that?
Foster, eagers, yes but not IT


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## McLovin (2 May 2014)

Up 10c this afternoon, on big volume. Fundie buying up? Look out above.


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## pixel (2 May 2014)

McLovin said:


> Up 10c this afternoon, on big volume. Fundie buying up? Look out above.




even more puzzling, the rally comes a day after a rather subdued "Trading Update" http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01514055

Ms Marquette: la donna e mobile


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## Hoborg (2 May 2014)

pixel said:


> even more puzzling, the rally comes a day after a rather subdued "Trading Update"




I'm wondering where the speeding ticket is...


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## VSntchr (2 May 2014)

Ves said:


> DTL isn't a high margin business,   it's profitability comes from high asset utilization and internal financial leverage versus its peers.   The main part of their business runs between 2-4% EBIT margin over the whole cycle.
> .




Agree Ves, and isn't it nice to have the chance to be able to purchase something at a big discount using the most conservative historical margin forecast..as compared to the usual mid range figure providing something perhaps reasonable at best (as has been the  case for alot of the companies I have looked at over the last 12 months).


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## Ves (2 May 2014)

VSntchr said:


> Agree Ves, and isn't it nice to have the chance to be able to purchase something at a big discount using the most conservative historical margin forecast..as compared to the usual mid range figure providing something perhaps reasonable at best (as has been the  case for alot of the companies I have looked at over the last 12 months).



Yes it is nice.

However,  in this case,   my position size is fairly full, without breaking too many portfolio rules,  I haven't really been able to take advantage of the big drop.  Rules are rules,  they are there to protect me.   My last purchase was in the $0.80s.   I'm obviously underwater.   I'd been buying this company since September 2011 every time it was within my value range.

I've already accepted that I cannot pick the bottom  (usually no where near it) and the only approach is to buy when I believe there is value....  premature ejaculation (I mean accumulation) probably makes me look a bit stupid in hindsight.  Jokes on me.


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## notting (2 May 2014)

McLovin said:


> Up 10c this afternoon, on big volume. Fundie buying up? Look out above.




I was watching it doing nothing to rocketing as Howard Coleman gave it the biggest ramp I have ever seen on sky news business.  On a quiet day it was most effective he and his team had already bought in!


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## fanger (3 May 2014)

pixel said:


> even more puzzling, the rally comes a day after a rather subdued "Trading Update" http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01514055
> 
> Ms Marquette: la donna e mobile
> 
> View attachment 57811




I didn't think the trading update was all that bad considering where the share price was trading, so I bought some more on the news at 56 cents. Looks like its paid off already although I didn't expect a 20% pop in share price so soon.


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## notting (3 May 2014)

I should add that I don't think it was a cynical ramp, just a very honest true conviction type of table pounding.  This thing is a bargain and _"is likely to double within a year"_.  
It seems everyone agreed. 
Howard is no fool, though he did like the picks and shovels over mining companies, like FWD whoopsy and the techs are in the middle of a bit of a wreck the 2nd.  
So patience, dears.  Could be a bit volatile for while and management may continue to cut the dividend in the short term so no guarantee of a well paid ride.
But in the end should be OK.


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## ftw129 (5 May 2014)

ftw129 said:


> This looks like it's going to be a good "traders" stock for those confident enough to buy at support and sell at resistance but the trend for the short to medium term is bearish and volatile.




The spike that happened last week was nothing unusual for this stock. It has these kinds of spikes around about 1 or 2 times a year, both up and down. Some much larger than the one on Friday. (As can be seen in the chart below). The fact that it happened in one day is more a sign of liquidity more than anything else.





If you're not in this stock yet, DO NOT ENTER. A bounce was long overdue.

View attachment 57304


Wait for price stabilisation and a clear trend back in the right direction. You will always miss out on the first move and the most exciting gains but they are the ones that carry the highest risk, are almost impossible to time and wipe people out before they've learned the lesson that "nothing is a sure thing" in this game.

Patience.

(Of course I could be very wrong so do not take this as advice. I'm either right or wrong It is just my personal opinion based on my Technical Analysis skills. I am not qualified to give you personal advice)


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## craft (13 June 2014)

Data#3 expands service offering via proposed investment in WiFi Analytics company.

Aligned with current business.

Incremental and staged investment.

Funded from surplus cash flow.

http://www.asx.com.au/asxpdf/20140613/pdf/42q5yb12rzyvcn.pdf


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## VSntchr (13 June 2014)

craft said:


> Data#3 expands service offering via proposed investment in WiFi Analytics company.
> 
> Aligned with current business.
> 
> ...




Funnily enough, I was just talking yesterday with a friend about how much better it feels when a company your invested in funds expansions with discretionary cash flow as opposed to debt or rattling the shareholder tin.

The biggest downside to a strategy is less of the cash flow being directed to shareholders, i.e. a _reduced_ total return, whereas the biggest downside of the alternative sources of funding is much more capital _destructive_.


----------



## craft (13 June 2014)

VSntchr said:


> Funnily enough, I was just talking yesterday with a friend about how much better it feels when a company your invested in funds expansions with discretionary cash flow as opposed to debt or rattling the shareholder tin.
> 
> The biggest downside to a strategy is less of the cash flow being directed to shareholders, i.e. a _reduced_ total return, whereas the biggest downside of the alternative sources of funding is much more capital _destructive_.




Hi VS

It feels better - It IS better.

Less cash flow being directed to shareholders is only a problem if you could have made a better investment yourself. You want discretionary cash flows directed to wherever it can make the best return. Too early to tell if that will be the case in this instance - but its a small bet, product is currently on sold by DTL and aligned with major supplier partner Cisco and fits their technology delivery business model.  DTL have been conservative with growth via accusation in the past so that also gives comfort and we are undoubtedly not in a frothy IT market.

So my initial verdict is, all good(and I wouldn't expect anything different from DTL management which is why I am a holder)  to sit and watch how it plays out.


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## VSntchr (21 November 2014)

John Grant:
"In fact, what these new entrants (speaking of: AWS, salesforce.com, rackspace) have done is commoditise elements of what is a complex and mission critical function for enterprises and one that, to operate in an integrated way with security and integrity, demands continuing high levels of investment. Over time, there may be a higher price for customers to pay than first appears."


This AGM emphasises the long term thinking that management employs when making decisions for this company. The comments made throughout John Grant's speech highlighted this to me several times, as does the transition plan which has been organised very early on. Pretty happy to be handing the reigns to someone who already has 10 years experience in a deputy role...

Guidance about spot on to what I expected, all in all a good AGM.


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## Ves (21 November 2014)

I always enjoy DTL's  presentations,  whether they be at results time or AGMs.   Feels like they put in a lot of effort to give shareholders an insight into both the business and the industry. I always feel like I've learnt something.   It is a pity that most listed businesses don't put even a slither of that effort in.

Profitability guidance looks promising.... probably recovering a bit quicker than I anticipated if it's maintainable into the medium term.


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## skc (21 November 2014)

Ves said:


> Profitability guidance looks promising.... probably recovering a bit quicker than I anticipated if it's maintainable into the medium term.




This followed SMX's upbeat guidance last month. I think there's something to be read there.

P.S. Looks like SMX sold down post-update thanks to MSCI deletion.


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## VSntchr (23 February 2015)

Pretty happy with the result today.
John and Laurence have done a good job of getting the info out to holders too; the recorded webinar is a good listen and gives some good insight into the vibe of DTL at present.

Employee expenses are up heavily this half, but as John Grant states - these are entirely revenue driving employees. Looks like the strategy of carrying costs and investing ahead of the curve continues to play out. 

In order to grow profitability over the PCP despite the hefty jump in employment expenses, DTL managed to increase the gross margin to a level not seen in a H1 result for a few years. 

I note that there was no discussion over Cloud Product offerings. This was something I picked up at the AGM that John mentioned. He said that the industry was finally starting to gain momentum and that the big developers were finally making globally resellable cloud offerings.

Depending on the future of the product segment, I see a few paths for DTL.
If they can continue to maintain/grow the product segment then we may see more of the same - a low margin, but highly successful business that operates on negative working capital without much need for reinvestment.

However, based on the acquisition activity and the re-shaping of the industry from capex to opex, there is a good chance that the service segment will slowly become the more relevant segment.
The valuation implications are very difficult to model as a number of factors will change; working capital will likely increase substantially from the massive negative balance we currently see (perhaps a loss of advantage here?), margins will substantially increase, revenue growth may be subdued or even in decline until the growth of services reaches scale to make the product revenue redundant, others I haven't though of?


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## fanger (23 February 2015)

VSntchr said:


> Pretty happy with the result today.
> John and Laurence have done a good job of getting the info out to holders too; the recorded webinar is a good listen and gives some good insight into the vibe of DTL at present.
> 
> Employee expenses are up heavily this half, but as John Grant states - these are entirely revenue driving employees. Looks like the strategy of carrying costs and investing ahead of the curve continues to play out.
> ...




I haven't seen the results yet but I did see it trade on the open and thought the worst. Will have a read through them tonight.


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## Huskar (5 March 2015)

VSntchr said:


> Pretty happy with the result today.
> John and Laurence have done a good job of getting the info out to holders too; the recorded webinar is a good listen and gives some good insight into the vibe of DTL at present.
> 
> Employee expenses are up heavily this half, but as John Grant states - these are entirely revenue driving employees. Looks like the strategy of carrying costs and investing ahead of the curve continues to play out.
> ...




Interesting analysis thanks VS
I saw they purchased a Wi-Fi analytics company - this is the real hot space (by which I mean data analytics more generally) in the US at the moment and I think has a lot of potential for their services business. Product segment may deteriorate much faster than envisioned if cloud providers simply cut out the middleman, especially given increasing market clout of AWS


----------



## ukulele (6 March 2015)

I'm long on DTL basically for the yield play. There have been a couple of bullish bars recently but the past few days the volume has dried up, I think everyone is waiting for the dividend next week. It'll be interesting what it does after it goes ex div.


----------



## ukulele (14 April 2015)

DTL has finally closed above 80cents on BIG volume after trying for the past week. I'm interested to see what others think technically on this stock at the moment. 

Today's candle does look bullish however the volume might actually be too high, showing background sellers are giving supply.


----------



## ftw129 (14 April 2015)

ftw129 said:


> The spike that happened last week was nothing unusual for this stock. It has these kinds of spikes around about 1 or 2 times a year, both up and down. Some much larger than the one on Friday. (As can be seen in the chart below). The fact that it happened in one day is more a sign of liquidity more than anything else.
> 
> View attachment 57849
> 
> ...




*Price (most likely) to fluctuate between .50c and .90c in the short to medium term.*

Hi ukelele,

I agree that the breaking through the .80c mark is a good sign but the real area of concern is still the .90c region. Should it break through there, then you can expect this 0.90c region to become an area of significant support for future price fluctuations and a positive sign for the stock price but even then, this stock looks like it will just channel between various areas of support and resistance. The trend that started back in 2001, is highly unlikely to continue in the short or even medium term.

I have just pasted the screen shot (below) of the exact same chart with the exact same comments I made a year ago as they are still relevant. (Albeit, with a few more weekly price bars now)




This stock looks like it has become a good "traders" stock who will buy around support levels and sell at levels of resistance. Very easy to see where they are with a simple chart. A lot more money to be made then just buying and praying 

*(All diagrams and opinions are here purely for illustration purposes only. You should not act on any of this information and seek your own advice)*


----------



## ftw129 (14 April 2015)

*(Ps... I'm not sure why the two charts are repeated at the bottom of my post (above). I can't seem to edit them out for some reason so please excuse the repitition)*


----------



## craft (22 July 2015)

Noticed DTL is having a good day on an earnings announcement. Superficially it looks like the early indications of earnings turn are following through - haven't had a good look yet though.  Any thoughts.


----------



## craft (22 July 2015)

Had a little more of a look and put the figure into context for myself.

HALF yearly NPAT.  Last bar is the mid range from the announcement.




Earnings decline trend has now given way to 2nd strong PCP result.  2nd highest ever second half result.


----------



## VSntchr (22 July 2015)

I like it craft 
Bit more invested capital this half given the Business Aspect acquisition along with the Wifi Analytics investment, but the result is heading in the right direction. Those dark clouds don't look as scary anymore.


----------



## craft (22 July 2015)

VSntchr said:


> I like it craft
> Bit more invested capital this half given the Business Aspect acquisition along with the Wifi Analytics investment, but the result is heading in the right direction. Those dark clouds don't look as scary anymore.




Its weird isn't it, Investing retained earnings during the down part of the cycle, how old fashioned is that? Don't they know the new black is to issue shares take on debt and buy when everything is roses.


----------



## Ves (22 July 2015)

Would probably need to do some research,  but there is one hypothesis,  that when the economy really slows down,  companies try to streamline their current operations and make them more efficient to cut back all the excesses from the previous cycle.  Generally the first to go are jobs.  But you cannot cut jobs forever.  Next best thing is to fix your asset base.  

The worst parts of the old cycle die by the bottom,  and the best parts of the next cycle are born there.

DTL is one of those companies that makes technological systems more efficient (and cost effective) for businesses.   Would have thought companies like this would see some benefit.  

Decisions have been delayed for a few years already across the economy if the commentary coming from IT companies is true.   Part of it is the rise of cloud technology,  and of course the slower economy has meant lots of their clients adopt a wait and see approach.

You can keep older technology for a while,  but you cannot ignore the need to replace it with something better forever. 

Too early to tell yet,  but obviously some grass roots.  Also noticed ASZ is shooting the lights out this year too.

Glad DTL survived my portfolio cull back in Feb.


----------



## craft (22 July 2015)

Hi Ves

Good to see you still following the stocks. 



> The worst parts of the old cycle die by the bottom, and the best parts of the next cycle are born there.   *- Ves*




I like that - original?   Messes with my concepts of anatomy though.


----------



## Ves (22 July 2015)

craft said:


> I like that - original?   Messes with my concepts of anatomy though.



I think it's a bit of (throw-away) idealism I've scrapped together from the sorts of things they like to write in newspapers and dusty old textbooks.   

Who knows... history might even repeat.


----------



## McLovin (22 July 2015)

I was starting to wonder when the worm would turn. DTL has been a management case study in managing a downturn. Don't sack your staff, and invest in the future.


----------



## sinner (22 July 2015)

Ves said:


> I think it's a bit of (throw-away) idealism I've scrapped together from the sorts of things they like to write in newspapers and dusty old textbooks.
> 
> Who knows... history might even repeat.




There is some evidence from the US market that (wish I could find the link) that sectors which bubble and then pop tend to outperform during the next downturn due to the exact process you describe.

A good contemporary example would be SLF vs STW off the 2011 lows. After the horrible post GFC deleveraging in REITs, SLF (54% to date) completely trounced the broad market STW (21% to date).


----------



## fanger (22 July 2015)

I added to my DTL holdings on Monday, looks like I fluked it. I was going to wait until the end of the week.


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## ukulele (14 September 2015)

Interesting price action early today, it was as if the punters forgot about the div.

Happy to hold this one for the medium to long term. Looks like a good company with no debt and the yield is also pretty good.


----------



## rcm617 (25 September 2015)

ukulele said:


> Interesting price action early today, it was as if the punters forgot about the div.
> 
> Happy to hold this one for the medium to long term. Looks like a good company with no debt and the yield is also pretty good.




Another great day for this stock. Has been steadily rising for the last few weeks. Very solid outlook in the annual report out today. Very good dividend payer.


----------



## ukulele (25 September 2015)

The markets definitely liked the report today. Volume was also decent which bodes well. 

From a technical standpoint this looks like a breakout candidate for sure.


----------



## systematic (25 September 2015)

I run a lot of screens 'just for fun.'  DTL _continually_ pops up on a variety of them lately.


----------



## rcm617 (26 September 2015)

With the banks facing a bit of an uncertain future, probably a lot of people looking at alternatives for good dividend payers. DTL would suit them down to the ground.
Seems to be a bit of a revival in most of the IT service companies.


----------



## Boggo (26 September 2015)

In my StockDoctor list of about 450 stocks.
A technical entry signal on the weekly chart and I have got it in my SMSF.

(click to expand)


----------



## McLovin (12 November 2015)

This seems a tad overdone this morning. DTL is weighted about 2/3rds toward the 2nd half. Taking a midpoint of their half year PBT guidance ($6m) gives a number around PBT $17m. After tax you're left with $12m, most of which ends up in shareholder's back-pockets. 15x earnings was hardly a stretch, and didn't seem like it deserved that sell-off. Maybe I missed something?


----------



## VSntchr (12 November 2015)

McLovin said:


> This seems a tad overdone this morning. DTL is weighted about 2/3rds toward the 2nd half. Taking a midpoint of their half year PBT guidance ($6m) gives a number around PBT $17m. After tax you're left with $12m, most of which ends up in shareholder's back-pockets. 15x earnings was hardly a stretch, and didn't seem like it deserved that sell-off. Maybe I missed something?




Agree.
Although, my thoughts coming in to the AGM was that any let down would get a bit of a smack given the good run it had since the FY result. But as you say the current multiple was hardly a stretch.

Based on the guidance given at the FY, which I didn't think was overly strong, I estimated $6m PBT...so not much change to the outlook for me.

Maybe the headline growth numbers of the full year brought in a new wave of holders which didn't really understand the business and expected those kind of figures to continue. After all, not everyone can actually read an entire presentation 

Also, despite the fall, it is comforting that DTL chooses to inform shareholders of their true feelings on performance rather than treat shareholders as puppets to be marketed to.
It's not inconceivable to me that they could have had the exact same numbers, but used some different wording in that update and we could have seen the share price move higher...


----------



## skc (12 November 2015)

McLovin said:


> This seems a tad overdone this morning. DTL is weighted about 2/3rds toward the 2nd half. Taking a midpoint of their half year PBT guidance ($6m) gives a number around PBT $17m. After tax you're left with $12m, most of which ends up in shareholder's back-pockets. 15x earnings was hardly a stretch, and didn't seem like it deserved that sell-off. Maybe I missed something?




Probably so on a one-day basis... The tone of the AGM is not overly bullish but there is no real bad news either. But the stock was trading around this level 2 months ago and not much has actually changed since then. So today's move is large, but it doesn't mean the price yesterday was "correct".

The stock is thin at the best of times and 1m shares traded today is high for this company, but not high relative to the shares outstanding... I have a small trading long but nothing of conviction.


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## McLovin (13 November 2015)

So, evidently yesterday's AGM was a little too bearish. Or the outlook statement was too hard to find.

"Data#3 forecasts continued earnings growth".

http://www.asx.com.au/asxpdf/20151113/pdf/432ynthr25gstd.pdf



			
				skc said:
			
		

> The tone of the AGM is not overly bullish but there is no real bad news either.




That was what I thought which is why I struggled to reconcile the SP action to the AGM prezzo. I guess like you say it's a thinly traded company so a bit of hot money that came in after the FY results was looking to get out ASAP.


----------



## fanger (23 February 2016)

Any thoughts on the report, personally it looked reasonable good?


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## ukulele (16 March 2016)

This stock is so thinly traded!

No one is willing to budge at all today, ex div.


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## skc (16 March 2016)

ukulele said:


> This stock is so thinly traded!
> 
> No one is willing to budge at all today, ex div.




Thinly traded stocks are good for holding as there are less noise... but bad for entry and exit (especially on unexpected negative events).


----------



## ukulele (18 March 2016)

I agree SKC. I'm happy to hold for now the dividends are great and I think it's a good company.


----------



## Rainman (7 April 2016)

Does anyone know why DTL holds so much cash on its books?  It has a market cap of $169 million, negligible debt and cash of $109 million.


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## VSntchr (7 April 2016)

Rainman said:


> Does anyone know why DTL holds so much cash on its books?  It has a market cap of $169 million, negligible debt and cash of $109 million.



The cash balance fluctuates massively between HY and FY results due to a big rush of orders as government budgets require spending before EOFY.

Despite this seasonality, they have been increasing the average cash balance over recent times.


----------



## Rainman (11 April 2016)

VSntchr said:


> The cash balance fluctuates massively between HY and FY results due to a big rush of orders as government budgets require spending before EOFY.
> 
> Despite this seasonality, they have been increasing the average cash balance over recent times.




Thanks.  When you look at DTL's EV/EBIT, you see that it is actually extremely cheap - much cheaper than its P/E ratio would lead you to believe.


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## VSntchr (26 April 2016)

Data#3 fell 7.21% today on no news. Entire sector seems to be on the nose presently. Haven't really seen a direct trigger for the sentiment other than continued concern over industry change and ability of the participants to adapt.

I'm sure there will be a few 'upcoming election causing deferral' excuses coming up for any guidance misses. Other movements today included RXP -5.56%, ASZ -3.13%. Despite inching higher today SMX has been in capitulation mode, trading down to $1.65ish from around $2.60 at HY report. 

Despite the falls, some of these companies have been providing decent numbers in the recent results, so could rebound strongly if results continue in that trajectory.


----------



## fanger (26 April 2016)

VSntchr said:


> Data#3 fell 7.21% today on no news. Entire sector seems to be on the nose presently. Haven't really seen a direct trigger for the sentiment other than continued concern over industry change and ability of the participants to adapt.
> 
> I'm sure there will be a few 'upcoming election causing deferral' excuses coming up for any guidance misses. Other movements today included RXP -5.56%, ASZ -3.13%. Despite inching higher today SMX has been in capitulation mode, trading down to $1.65ish from around $2.60 at HY report.
> 
> Despite the falls, some of these companies have been providing decent numbers in the recent results, so could rebound strongly if results continue in that trajectory.




Sound like a good time to pick up some more.


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## Knobby22 (27 April 2016)

Yes, but look where the next support line is.


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## Klogg (27 April 2016)

VSntchr said:


> Despite the falls, some of these companies have been providing decent numbers in the recent results, so could rebound strongly if results continue in that trajectory.




Exactly this.

DDR reported strongly in their first quarter. Similarly, I've read some Microsoft presentations that Azure (Cloud) uptake in Australia has increased >100% in the year. Based on the jobs I've seen for Pre-sales Cloud Architects, that seems to match.

I'd be surprised if any service providers with Cloud offerings reported a drop in revenues.


----------



## fanger (27 April 2016)

Knobby22 said:


> Yes, but look where the next support line is.





I'm crap at reading charts so where is the support?


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## ukulele (28 April 2016)

The big drop through the psychological $1 barrier could have been a bunch of people getting stopped out? The next support looks like 90cents. 

I'm still happy to hold this one for the longer term.


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## ukulele (26 July 2016)

The market really liked the announcement yesterday pushing the stock up a lot with a lot of volume. But perhaps too much volume?

If the audited profit comes at 13M I expect the dividend to be over 5 cents; any other guesses?


----------



## Ves (26 July 2016)

ukulele said:


> If the audited profit comes at 13M I expect the dividend to be over 5 cents; any other guesses?




Yeah 5 cents sounds about right for the final dividend (assuming there's no accounting trickery inflating the profit and cash conversion is similar).

That's about 90% payout.  

I'm assuming they'll exercise their option on the balance of the shares in Discovery Technology around 30 June 2017 (there's 38.4% of shares they don't already own, if I recall). Whilst it won't be a large outlay,  depending on market value,  it may require a couple of million.


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## ukulele (23 August 2016)

Surprised slightly on the upside with their report yesterday, also a 5.5c dividend. One thing that concerns me slightly is the super high pay out ratio. I'd like to see more reinvestment into the business.

I bought in at a dollar just under a year ago. I wish all my stocks returned 50% over a the past year lol!!!


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## ukulele (22 September 2016)

Huge selling after the dividend! Not sure why, perhaps because the next dividend is historically much less than the September one? Happy to hold for the medium term as I think it's a great company with good direction.


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## craft (22 September 2016)

Underlying result wasn't quite as good as statutory number in my opinion - Just a tremor as valuation adjusts from one predominant understanding to next as far as I'm concerned. I thought price had got a bit ahead of itself but that's it - underlying business seems to be going right direction. 




ukulele said:


> Huge selling after the dividend! Not sure why, perhaps because the next dividend is historically much less than the September one? Happy to hold for the medium term as I think it's a great company with good direction.


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## Klogg (22 September 2016)

craft said:


> Underlying result wasn't quite as good as statutory number in my opinion




Just out of curiousity, are you referring to the reversal of "deferred consideration" for business aspect?


----------



## craft (22 September 2016)

Klogg said:


> Just out of curiousity, are you referring to the reversal of "deferred consideration" for business aspect?



Yes


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## peter2 (17 July 2017)

A very timely (lucky) entry last week for the weekly portfolio in the members section. 
No news announced yet. The chart indicated that the stock was being accumulated as price was trading in a range that was constricting (triangle pattern) while the OBV (volume indicator) was rising and TMF >0 in both the daily and weekly charts.


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## Miner (17 July 2017)

Hi Peter2
Pardon my ignorance to read charts.
What exactly are you hinting?
On 16th June a major reduction on holding. Still the share price was not affected.


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## peter2 (17 July 2017)

I was surprised by today's spike in price with above average volume and no corresponding news. I'm aware that price does get a little volatile sometimes in this stock due to the low daily volume. Someone was prepared to pay 7% more than yesterday in order to buy a parcel. I just expected there to be news and was surprised there was none reported to the ASX. 

I've been monitoring this chart for some time as price has traded in a range for seven months. Break-outs after such a long period can be strong and rewarding if you hold.


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## craft (18 July 2017)

peter2 said:


> A very timely (lucky) entry last week for the weekly portfolio in the members section.
> No news announced yet. The chart indicated that the stock was being accumulated as price was trading in a range that was constricting (triangle pattern) while the OBV (volume indicator) was rising and TMF >0 in both the daily and weekly charts.
> View attachment 71884



Squeeze and pop, zig and zag, dip and dive, pitch and roll, fake and fade, take your pick – to move, well it’s got to move and it will do it in whatever fashion leads to a trading profit equilibrium between those trading it. (less their costs of course) 







> Ours is not to reason why. Ours is but to do and die



Alfred Lord Tennyson

Longer term though business performance is going to act like a tide on all those indiscriminate price movements to transfer business performance into the stock price and DTL’s business is heading in the right direction at the moment – so maybe just a good 2nd half business performance anticipation rather than news needed to break the squeeze upwards.

--------
DTL has two very distinctive halves, so the following charts just look at second halves.

Margin recovery progressing well.






Asset Utilisation rate stabalising, perhaps showing signs of recovery.





Business Financial Economics Strong.





Resulting in Improving profitability.






Applied to growing top line






Results in growing Earnings per share






Happy Days


----------



## peter2 (11 July 2019)

It's been two years since the last post on DTL (flagged on the weekly chart). Price did go a little higher to 2.00 before drifting lower to 1.40. DTL has rallied with the market in 2019 and only today reported record earnings news. Price spiked. 






@craft, @skc thinking well of you both. Trust all is well with you and your families.


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## rcm617 (19 December 2019)

Has risen another 50% since the last post after the record FY19 results. HY results are usually down a bit as a percentage of the FY results, so have lightened off a bit at these prices hoping to pick up again cheaper after results are announced. Still holding my core parcel which I bought back in 2002.


----------



## fanger (8 February 2020)

rcm617 said:


> Still holding my core parcel which I bought back in 2002



Nice little earner just on dividends alone. I've been in since 2012 and can't complain.


----------



## frugal.rock (28 August 2020)

That sure is an impressive trajectory.
MUFG now substantial holder.


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## finicky (11 September 2020)

Director Laurence Baynham spent $200k buying 34.4k shares of DTL on market.

Disc: held
Sentiment: sold half my holding a couple of months ago to cash up for the crash


----------



## rnr (14 September 2020)

finicky said:


> Director Laurence Baynham spent $200k buying 34.4k shares of DTL on market.









It would appear as though DTL has found support at the $5.64 - $5.67 level as well as forming an a-b-c wave lower which may terminate at said support. Will the ATH of $6.56 be taken out soon?
DYOR


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## peter2 (18 August 2021)

It's been a while since the last post. Understandable as *DTL* has been in a sloppy/choppy corrective move down the last year. Today' 1stBB and 123 Low (in the green buy zone) shows there's a light at the end of the tunnel.  The light could be an oncoming train as *DTL* reports tomorrow. I'll wait until after the news.


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## divs4ever (18 August 2021)

am only up about 430% on DTL 

 hasn't been a bad stock , but i have had some much bigger winners elsewhere 

 as long as i don't get sold out ( like is happening to me with HSN )


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## Knobby22 (18 August 2021)

Bought in at $6 so now underwater.
Short term problems with getting chips has hurt them recently which caught me out.
Quite interested in seeing the report.


----------



## divs4ever (18 August 2021)

i bought in  during December 2013  @ 88.5c 



 however there are GIANTS in this space now  , almost anyone profitable is a potential take-over target


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## Miner (18 August 2021)

Knobby22 said:


> Bought in at $6 so now underwater.
> Short term problems with getting chips has hurt them recently which caught me out.
> Quite interested in seeing the report.



Hopefully @Knobby22  tomorrow's result announcement will buy yuo some peace.
there were few purchases from the directors at a much higher price than Tuesday's price.
Lets keep fingers crossed


			https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02345618-2A1282699?access_token=83ff96335c2d45a094df02a206a39ff4
		

this was a confident announcement one month back and market was too sluggish until today to positively react on it.



			https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02396440-2A1310447?access_token=83ff96335c2d45a094df02a206a39ff4
		




			https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02347683-2A1283764?access_token=83ff96335c2d45a094df02a206a39ff4


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## finicky (19 August 2021)

DTL record year but rising eps did not keep up with revenue increase and gross margin 10% vs 11.6% in FY20.
ROE  was 45%, same as last year
Another one that looks around twice fair price (like CDA) by my crude reckoning although I add little for it being growth, others would add  more maybe. Tempted to sell my remaining holding to add to  'strategic' cash.


----------



## LynnieN (30 August 2021)

Any thoughts out there on Data3. I have held this stock for a few years and have down well share increase and dividend wise but don't know why the share price is fluctuating on a daily basis.   General market conditions or ???


----------



## divs4ever (30 August 2021)

welcome to posting  ( and ASF  )

well rival HSN ( i hold HSN also )   is being sold   the major shareholder wants to exit 

 there is a general wave on take-overs  , compounded by supply-chain disruptions  , and many changes in IT  , including those who suddenly wonder if the love affair with cloud-computing was a good idea 

 i would say the IT sector is in flux  , the investment cash is going ( mostly ) into apps , not software and hardware  infrastructure 

 where to next i wonder 

 PS it is very easy to make bad business moves it this area 

 and i would call the current market nervous ( and why wouldn't they be )  , so much super cash  that needs a home and few companies with solid earnings results 

 cheers


----------



## finicky (8 October 2021)

DTL @ 5.25 ^ 6%
Been a long wait but the 12 month correction in DTL is looking mature? Been a couple of directors buying on market recently too.
The Daily chart is showing another 'impulse' rally on higher volume and the price is not far below the downtrend resistance line which is currently at about 5.50. Price tested the prior low @4.50 before rallying. Really looks OK.
Not that I am buying, on the contrary, have been waiting for a bull run before selling half of what I have left. Cashing out this and that before a crash. Have added the monthly chart for perspective - could this be be an ABC Counter trend move completing?

Daily





Monthly


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## Knobby22 (31 December 2021)

One of my tips for the year.
Everyone back in the office (including DTL consultants) - the internet etc. is changing fast - big companies need a good operator.
This company will rise next year, the only question is by how much, hopefully a fair bit.


----------



## divs4ever (18 January 2022)

Data# 3 expects to report strong 1H FY22 earnings growth  Estimated first half earnings growth of approximately 30%

BRISBANE, Tuesday 18 January 2022: 

Australia’s leading IT services and solutions provider, Data# 3 Limited (ASX: DTL) has advised that its consolidated net profit before tax (NPBT) for the first half of FY22 is expected to be slightly ahead of the top end of the $15 to $18 million guidance range provided at the AGM in October 2021.

Subject to finalising the interim accounts and the audit review, 1H FY22 NPBT and earnings per share are expected to be approximately 30% higher than the record 1H FY21 results.

The Board intends to announce the detailed audited results and interim dividend on 17 February 2022. The company will present a market briefing on the results starting at 11:30am (AEDT) on 17 February 2022.

The following URL will provide access to the live event, and to an archived webcast following the event: https://webcast.openbriefing.com/8302/

 DYOR

 i hold DTL ( 'free-carried ' ) ( av. SP  90.5 cents )


----------



## finicky (18 January 2022)

Gap up break of year long resistance. Might be heading for its all time high. 
Announces *eps* for *H1FY22* expected to be *30% higher* than pcp.
I believe from my rough methods that DTL is at least 50% overpriced but then I'm not a believer in general economic growth in these times, let alone into perpetuity.

Held
I was going to sell half if it cracked $6 again but feeling complacent.

2 Yr Daily


----------



## galumay (18 January 2022)

Agree Finicky, looks expensive already to me. I would have to dig deeper to work out whats been going on with FCF, its all over the place.


----------



## peter2 (31 January 2022)

*DTL* spiked up 15% on the good news report. Everything's rosy. 

Now, two weeks later after the market selloff *DTL* is 17% lower. Further details will be released 17 Feb 22. 
Trading conditions for *DTL* are unlikely to have changed much in two weeks. Are all those who missed out after the spike up going to buy soon? Can I earn 0.50 - 1.00 if I risk 0.30?


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## finicky (17 February 2022)

H1FY22 - Still going good. Equity per share continues its rising trend while return on that equity is sustaIned or enhanced. Shares on issue rock steady.
Overpriced by ~$1.50, but have decided not to sell any more.


----------



## divs4ever (17 February 2022)

yep shares like this  ( bought @ 90.5 cents ) , HSN ( bought @ 83 cents ) , TNE ( bought @ $1,10 )  turned out  to be a nice way to get a bite of the IT action ( and they paid out some divs on the way )


----------



## finicky (14 July 2022)

Up 12% in early trading. At least this one keeps delivering. Fortunately they are not exploring for gold.
Held.


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## finicky (1 November 2022)

Pretty good day today except for DTL (in my p/f). Low volume for a down day though.
Am again contemplating selling my already reduced DTL holding as it approaches the high made 2 years ago and is by my rough estimation priced at *double* its value, unless calculating for relentless growth.
The current multiple of book value is 17x !
The PE is 32 (average of FY22 actual and FY23 est on Commsec).
The EDITDA and NPAT took 5 years to *double* and reach the FY22 level of profit. Five years is a long wait these days when noone knows what major impacts will occur next week. And despite its quality, DTL has had very large corrections over its history - massive ones in the 2000 Tech crash and 2011-14, it halved in the Wuhan crash, had another couple of significant corrections. It's tempting to sell, bank half and put the rest into something at ground level like CDA.

Held

All Data Montly


----------



## divs4ever (1 November 2022)

bought these back in  December 2013  ( Xmas Eve  , Santa came early ) @ 88.5 cents   and reduced ( to snatch back that investment capital )  November 2017  ,  and has sat in that 'bottom-drawer ever since 

 i agree  , if buying now it looks over-valued ( to me ) , has been one of those shares  where being early(ish ) and patient has paid off 

 MAYBE all those cyber-attacks will give this a mild boost in the coming year ( for those looking at an exit )


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## finicky (2 November 2022)

Getting a *sell* order for half filled: 5,000 @ 7.09
Getting to a stronger cash position is important. Hard to sell stock in a quality company.
Don't have a clear notion of where the chart is headed, it actually looks pretty healthy but ambivalent.
It's well overvalued in my book, more so with the depth of uncertainty these days. But it is still fresh to memory as to how crazily overvalued Codan (CDA) got to before it crashed.

Held


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