Datatec - Operational gearing shines through

Today’s trading update follows the group’s post-close trading update in March 2022, where management confirmed FY22 group revenue would be up 13% year-on-year to US$4.65bn. As a listing requirement, and as expected, Datatec has now been required to confirm EPS will be more than 20% above the FY21 figure. Underlying EPS (uEPS) is expected to be 18.0–19.0 US cents (FY21: 13.6 US cents), 32–40% higher than in FY21, with headline and reported EPS both multiples of their FY21 comparators. uEPS ranges from 6% to 12% above our forecast FY22 EPS of 17.0 US cents, reflecting robust global demand for technology solutions. With all three divisions contributing strongly and with demand underpinned by an expected unwinding of the record backlog in H223 and FY24, we remain positive about the group’s prospects despite continuing economic and geopolitical uncertainties. Datatec trades on 3.9x our FY22e EV/EBITDA and 3.5x our FY23e EV/EBITDA, which we feel does not adequately recognise the group’s performance or prospects. We expect an update on Datatec’s strategic review with the full results on or around 24 May, when we also propose to review our estimates.