Datatec - Operational gearing drives EPS growth

H122 underlying earnings per share (uEPS) is expected to be between 8.0 and 8.5 US cents, more than double the H121 comparator at the onset of the COVID-19 pandemic (H121: 3.9 US cents) and c 50% of our FY22 uEPS estimates (16.5 US cents). Under JSE rules, management is required to put out a further trading update (following the 15 September trading update), since H122 EPS estimates are expected to be more than 20% above the H121 comparator. As we flagged in our 15 September note, Datatec’s operational gearing magnified the top-line performance (H122 revenues rose 15% y-o-y to c US$2.26bn) at the earnings level. Assuming momentum is carried into H222, and considering Datatec’s historical seasonal weighting to the second half of the year, the group remains on track to meet and potentially exceed our FY22 earnings estimates.