DDR (ASX) - High FCF Value, High Dividend

Company Profile

Dicker Data is Australia and New Zealand’s largest independent distributor of IT hardware with a network of more than 5,000 business partners.

It already distributes the hardware of major IT hardware manufacturers like Hewlett Packard, Cisco, Microsoft, Samsung, Toshiba and Lenovo, with its shift into cloud and internet-of-things related hardware offering additional growth opportunities for a business commonly mistaken as just a dividend play.

General Thoughts

  • Qualifying James O'Shaugnessy Cornerstone Growth

  • It is in IT sector which has a lot of potential,

  • Technically, IT sector is currently Uptrend

  • The internet-of-things (IoT) is generally regarded as the next great technological trend after cloud computing (online data storage) and as such companies earning revenues in the IoT space may have the opportunity to grow over the long term.

  • It is undervalued according to CF method by Simplywall ($2.4 vs. $6.8)

  • It paying high dividend ~ 6.64%, higher than market top dividend payers @ 4.9%

  • It has advised that it plans to pay a fully franked 16.4 cents per share dividend. That equates to a 6.9% yield at the current share price.

  • It has an excellent track record of growth thanks to its dominant market position and excellent management team that has heavy levels of insider share ownership.

  • It has very HIGH level of Debt ~ 152%, however the level of debt compared to Net Worth has been reduced over the past 5 years. Interest on debt is also well covered by Earnings

  • Chart pattern looks like in Rangebound with Upward bias trend

  • Plan to accumulate this stock below $3.0 and hold for at least 6 months

What MOAT?

  • Switching costs.

  • Protected demand (e.g. network effects etc).

  • Supply advantages (e.g. government licences for special access to resources etc)

  • Economies of scale.

  • Customer moat

First Entry Price: $2.44

Position Size: 2,650

  • Risk = 1%

  • ATR Multiple = 2

  • Stock ATR Daily ~ 0.07

  • Recommended Quantity = 2,650 shares

  • Initial Buy = 1,000 shares @ 2.44

  • Pyramid #1 = 1,000 shares @ 2.59

  • Re-Buy (22/11) = 1,000 shares @ 2.9

Target Price: $8

Reasons to Buy


November 21, 2017 | Tom Richardson

Is Dicker Data Ltd the answer for growth & income?

17 July, 2017

Dicker Data launches enterprise data business unit in digital transformation driveForges partnership with Hitachi Data Systems AustraliaSamira Sarraf (ARN) | Dicker Data (ASX:DDR) has launched an Enterprise Data Business unit to focus on digital transformation and the internet of things (IoT), in a move set to bring about an opportunity for resellers in the mid-market and enterprise sectors.

Backing up this strategy, is a distribution agreement with Hitachi Data Systems (HDS) Australia. Dicker Data’s partners will have access to HDS’s offerings including infrastructure, content, cloud, IoT and analytics.

Why I’m banking on Dicker Data Ltd shares -

Fundamental Reasons

Technical Reasons

Chart Update - Feb 2018

Chart Update - Jul 2017

Accumulation seems to be done in a week or so. Rerating to a higher level supported by new order Wins should push it higher.

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