Datatec - Strategic review to unlock embedded value

Datatec has announced a strategic review to ‘unlock and maximise shareholder value’ and ‘address the persistent gap between Datatec’s valuation and the inherent value of its underlying assets’. The solid operating performance across all divisions in FY21 gives us reassurance for Datatec’s interim results as the H122 reporting period ends, with strong industry growth globally. The positive anticipated H122 performance only exacerbates the gulf in valuation between Datatec and its peers. We have left our estimates unchanged but have revisited our valuation analysis and, with all three divisions expected to perform well, our conservative SOTP analysis highlights potential upside of c 175% from current share price levels. As the global economy recovers, the shares offer defensive growth and an attractive yield, with the potential for significant upside as management (with a track record of deal making) unlocks this embedded value. The group trades on 2.8x FY22e EV/EBITDA and 12.0x FY22e P/E.