Edison Investment Research Limited
London, UK, 3 November 2020
Datatec (DTCJ): Transformation and growth potential not reflected in valuation
After its reorganisation, all three of Datatec's divisions are now profitable and cash generative. In the recent H121 results Logicalis was affected by currency weakness, although this was offset by a strong performance from Westcon. However, Datatec is still trading at a substantial discount to its peers, with an FY21e EV/EBITDA of c 2.5x and P/E of c 13.3x.
In our opinion, this valuation is backward looking and does not reflect Datatec's recent transformation or its future growth prospects. A simple sum-of-the-parts analysis suggests Datatec's current EV is well below our EV for the Logicalis division alone (c US$600m), with Westcon and Analysys Mason effectively thrown in for free.
Datatec's management is focused on unlocking the group's underlying value. Given trends such as security, networking, cloud and unified communications, Datatec expects revenue growth of 4-6% in the medium term, driven by investment in software and services.
About Datatec: Datatec is a South Africa-listed multinational ICT business, serving clients globally, predominantly in the networking and telecoms sectors. The group operates through three main divisions: Westcon International (distribution); Logicalis (IT services); and Analysys Mason (consulting).
All reports published by Edison are available to download free of charge from its website
About Edison: Edison is a leading research and investor relations consultancy, connecting listed companies to the widest pool of global investors. By focusing on both the volume and quality of investors reached - across institutions, family offices, wealth managers and retail investors - Edison is able to create and gauge intent to purchase, even in the darkest pools of capital. Having founded its own Investor Relations segment 17 years ago, Edison remains the largest in market with more than 100 analysts, covering every economic sector. Headquartered in London we also have offices in New York, Frankfurt, Amsterdam and Tel Aviv as well as presence in Athens, Johannesburg and Sydney
Edison is authorised and regulated by the Financial Conduct Authority.
Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities.
For more information please contact Edison:
Richard Williamson +44 (0)20 3077 5700
Learn more at www.edisongroup.com and connect with Edison on:
Dissemination of a CORPORATE NEWS, transmitted by EQS Group.