Datatec - 13% growth despite supply chain constraints

In a post-close trading update, Datatec’s management has released FY22 revenue figures. Group revenue is expected to have risen c 13% y-o-y to US$4.65bn (FY21: US$4.11bn), implying H222 revenues of US$2.39bn with 11% growth y-o-y, continuing the impressive growth seen in H122 (15% growth y-o-y). In particular, the group’s performance reflects robust demand for networking, security and cloud infrastructure. These results are c 3% ahead of our FY22 revenue estimates (FY22e: US$4.51bn), which we increased following the interim results. Given the continuing global strength of demand for technology solutions, underpinned by a steady unwinding of the record backlog seen in FY22 from H223, it is hard not to be optimistic about the group’s prospects for FY23/24, despite continuing economic and geopolitical uncertainties. With all three divisions contributing strongly, Datatec currently trades on 3.8x Edison’s FY22 EV/EBITDA, which we feel does not recognise the group’s trajectory. We also expect a conclusion to Datatec’s strategic review in FY23. We propose to review our estimates with the full results expected on or around 24 May.