DTL - Data#3 Limited

[VSntchr]

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".

 

[McLovin]

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.

A recent example of a fall (which may or may not be justified) is Amazon who were seen missing lofty expectations for Christmas sales. [The sales numbers were fantastic, just the expectations were more fantastic.]

A fallen growth stock doesn't become fashionable again until it has a lower-than-market price-earnings ratio where it attracts "value investors". Value investors have a different agenda. They want the business run for cash and maybe for buybacks. Shareholders will pressure management to meet their expectations. [Example: Apple.] If earnings fall or buy-backs slow these shareholders are disappointed.

Below the value investors - and mentioned in later tweets - are the Ben Graham style bottom feeders who get really interested when the stock is trading at half cash. Whereas traditional value investors want the business run for cash the true bottom feeders want the business closed for cash. Zynga at bottom was borderline of interest these investors.

Outside this are the arbitrageurs that just want to rent the stock for a short term deal. No deal and they are disappointed.

This is a generalization. But being a non-conformist at heart I want to look at the places between - stocks dumped by growth investors for example before they become interesting to value investors - or stocks that are approaching Ben Graham levels but still have viable businesses.

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.

 

[fanger]

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.

 

[Huskar]

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?

 

[ROE]

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?

 

[Klogg]

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

 

[ROE]

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

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

 

[herzy]

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?

 

[ftw129]

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.

 

[VSntchr]

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.

 

[fanger]

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.

 

[ROE]

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...

 

[Ves]

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.

 

[fanger]

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.

 

[qldfrog]

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

 

[McLovin]

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

 

[pixel]

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

 

[Hoborg]

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

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

 

[VSntchr]

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).

 

[Ves]

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.