Datacentrix remains positive
Johannesburg - Considering that the six months to August 2005 - the first half of its 2006 financial year - were a near disaster, and the company's first setback since listing eight years ago, it's hardly newsworthy that the latest six months show a major improvement on 12 months ago. They darned well needed to be.
A better comparison is with the six months to August 2004, two years ago, and this is instructive: sales up from R451m by a third to R604m; Ebitda up 16% from R43.2m to R50m; and HEPS of 14.5c against 14.9c.
Now the latest HEPS figure is depressed by an exceptionally heavy STC charge on the extraordinary dividend declared at the end of the last financial year; if you adjust for this, I reckon a more representative figure would be about 16.3c.
This comparison is not exact, because of the introduction of IFRS, but it does confirm the narrowing of margins.
Indeed, an analyst at the results briefing queried the fact that the latest Ebitda margin of 8.3% compares with 9.8% in the second half of FY2006.
Still, Datacentrix remains positive. It's strongly cash-generative.
'Relentless' organic growth
While the reporting dates of August and February are cash peaks, we were told that the current cash holding is about R120m; it was R166m in February, but since then Datacentrix has paid out R70m in dividends.
Following the declaration of a maiden annual dividend in FY2005, it's now declaring a maiden interim, of 7c, in line with the policy of keeping dividends twice covered.
And as always, chairperson Gary Morolo, CFEO Gerhard Uys and their team are bullish.
They identify as favourable industry trends the pending upgrades of a number of Microsoft products, government infrastructure development, compliance and process automation and security, and also expect to benefit from increased outsourcing and the automation of business processes.
So, of course, do many others. But Datacentrix claims a number of differentiating factors: its strong finances, what it calls "relentless" organic growth (it has made no acquisitions for four years), its customer base and - another familiar line - its people.
Because of the base effect, it would be unrealistic to look for the same sort of earnings growth in the second half.
One of the better small-cap IT stocks
In the six months to February, HEPS were 21.1c. I reckon a conservative improvement on this would be 15%, a more generous one 20%.
Split the difference and you get 24.8c, for a 12-month total of about 39.3c.
The current share price of 345c is close to the top of the 12-month trading range of 365c-218c, but my projected forward p:e is only 8.8.
A twice-covered final dividend of 12c would make a total of 19c, to yield 5.5%.
This doesn't look too demanding a rating, and I know some analysts think Datacentrix is a possible takeover target.
I wouldn't want to fill my boots with the stock, but with a market cap shading R700m it could be one of the better small-cap IT stocks. The one caveat is that margins mustn't come under continuing pressure.
News source: www.news24.co.za
Posted by: www.SouthAfrica-CarHire.com
Save money, hire from Click Car Hire
Click Click... Vroom, Vroom
