DDR - Dicker Data

[JohnDe]

AGM Presentation

https://cdn-api.markitdigital.com/apiman-gateway/CommSec/commsec-node-api/1.0/event/document/1410-02523481-7997NC319KG8ABKB9D832JAGMI/pdf?access_token=00071k8DkHsruEBhZUm1M0uqrYp6

 

[peter2]

DDR: The $12 level appears to be a solid level of support. Price has traded at $12 three times and each time there's been evidence of demand (buyers).

In the current bearish sentiment I'll wait for a reversal pattern with a close >$13 before considered a buy.

 

[JohnDe]

Topped up at todays low, finished in the green. All the directors have been buying.

 

[peter2]

H1 2022 results. They looked quite good to me but the market had a different opinion selling them down immediately.

I'll be waiting for a reversal setup to trade them again. Perhaps near the bottom of the large corrective channel that has formed.

 

[Dona Ferentes]

Dicker Data said its operating profit rose 11 per cent to $51 million in the six months ended June 30 as its sales increased 36 per cent to $1.46 billion.

... so, less profit per unit?

Demand remains strong, although supply chain challenges, rising freight costs and acquisition costs affected profit margins over the half year.

 

[galumay]

Yep, I think the drop was instros getting out, someone pointed out a lot of their models are weighted to gross margins which obviously contracted a little. Still exceptional for a distro business and certainly not something that made me reconsider continuing to hold.

 

[JohnDe]

Is it me or has there been a few SPPs happening lately?

Dicker Data Limited (Dicker Data) (ASXDR) confirms that the offer booklet (SPP Offer Booklet) in relation to the Company’s recently announced Share Purchase Plan (SPP) was dispatched to eligible shareholders earlier today. As such, the SPP is now open.​

​

The key dates for the SPP are set out below​

 

[galumay]

I will skip the SPP, too expensive, share price has nearly dropped to the same level. Annoying about the dilution, would prefer they suspended the divvy to get the debt under control and expand the w'house, but of course Fast Davey needs the divvies for his Kiwi Lightning McQueen.`

 

[kenny]

Revisiting DDR as one of my perennial favourites. It seems that the SP has taken a battering since the SPP closed out on 23rd September.
The SPP was successful in raising $21.8M at the $10.30 institutional price despite the SP ending lower than that by the end of the SPP period.

This is despite some recent positive news;

• locking in Extreme Networks distribution (initially part of acquired Hills subsidiary but uncertain as to whether the US networking vendor would continue the arrangement).
• extension of the NVIDIA partnership. Dicker Data will distribute NVIDIA DGX systems to deliver AI solutions at scale for large enterprises and governments. NVIDIA vGPU (virtual GPU) solutions for virtual desktops and workstations; NVIDIA AI Enterprise software for data science and AI; and NVIDIA enterprise GPUs to accelerate AI, high-performance computing, data science and graphics.

So where does fair value lie for DDR given the down trend we see?

 

[galumay]

So where does fair value lie for DDR given the down trend we see?

I think the issue is partly that like so many other businesses, DDR was massively over priced, so there is a lot of downward price pressure as the market returns to valuing businesses on real fundamentals instead of price to magic ratios.

I didn't participate in the recent SPP as I thought it was too expensive, and I as you note the market price dropped below the SPP anyway so not sure why anyone participated.

My range of value is a fraction of the current price, but as my cost basis is about $1.50 I don't let that worry me. I would not be a buyer though at anything like current prices.

 

[finicky]

I read this thread yesterday and did my cafe napkin valuation which agreed with your overvalued comment. It's a company that I would like to have a few shares in one day - although that's looking in the rear vision mirror at past performance.
I gave it arbitrary 'points' for a trend of rising book value while continuing a high return on equity but took the points off for high leverage. Also today I notice the increased inventory and receivables at last report. Maybe that's for a good reason like Codan (CDA) argues. To me it's worth maybe $7 but that's without a discount to make it particularly desirable.

Not Held

 

[galumay]

Yes mate, I have never liked the high leverage, its all for the receivables, company believe its the best capital allocation for this type of business. (given the strength of their margins for a distro they may be right.) I suspect the real reason is so David can have big fat divvy cheques for the race car development. Inventory will roll off, their history of managing working capital is exemplary. I think the metric that uncovers the power of the business model is the reinvestment rate and the ROIIC, (80% & 20%+)

My range of value is even lower than $7, but if you could get in at that level you would probably do ok over time.

 

[kenny]

One of the perennial appeals that's spruiked about this business is that David Dicker draws no salary from DDR and "lives" off the dividends. Such implied alignment with investors is a compelling story to indicate the commitment he would have to running the business optimally.

Indeed the "insiders of DDR together own over 60% of the company. These factors alone contribute to the SP premium.

Simply Wall St agrees about he troubling debt levels, saying;

Debt Level: DDR's net debt to equity ratio (159.5%) is considered high.
Reducing Debt: DDR's debt to equity ratio has increased from 134.2% to 175.7% over the past 5 years.

It's hard to say whether a $7 SP would bring this back to a reasonable valuation.

 

[JohnDe]

DDR business model is basically unchanged since being founded by David Dicker & Fiona Brown.

Looks like this is one business where the old saying rings true, if it isn’t broken… Though the SP did drop drastically from the Covid highs.

 

[Gringotts Bank]

Double bottom may complete now, after today's ann.

Target somewhere between $9.18 and $10.

 

[peter2]

Reasonable estimate at the time however price has continued lower to make triple bottom at 7.80.

 

[Gringotts Bank]

Reasonable estimate at the time however price has continued lower to make triple bottom at 7.80.

I wasn't expecting today's bounce. The price patterning and volume give a little bit of encouragement. Waiting to see how it approaches the trendline.

 

[peter2]

Noticed today's bounce also and consider it a very bullish sign.

 

[galumay]

Tax loss selling finding a new home?! Good for my PF anyway.

 

[Dona Ferentes]

DDR seems to have formed a base ... lifted a bit on results last week. Now around $8.50

.
There's a dividend.

NH