dtl - silent overchiever

Followers of the listed IT sector might have noticed DTL's "Upgrade" announcement yesterday, which has prompted the Fin Review today to run with a headline article n the IT sector. This should provide the sentiment boost you might be looking for. For its part, I have been a shareholder in DTL since the early 2000's, and it has created significant wealth for shareholders over that period. For valuation context, DTL is trading at what I think are reasonably attractive valuation grounds, viz. EV/EBITDA = 6.0x, DY = 7.9%, FCF yield (on Market Cap) = 11%, FCF yield (on EV) = 13.5% [yield on EV is higher given DTL's net cash position, which I model to reach over $20m by June 2011 balance date, absent any capital management initiatives before then (I forecast DTL will have almost $17m in retained earnings and $12m in franking credits by June, 2011)]. The caveat is that the Hardware provision part of DTL's business model renders it a lesser quality business in my opinion than say, an ASZ or a SMX. And then there are the definitional questions that arise froms its pending foray into the IT Recruitment sector. While DTL's earnings growth has not skipped a beat during the past decade (its EBITDA and NPAT charts describe near-perfect parabolic functions), the comapny's EBITDA margin experience warrants mention and scrutiny: having risen linearly from 3% (yes, that's right, a mere 3%) in 2003, to over 4% in 2007, and then having retraced secularly to 3% in JH09 and 2.4% in DH09 (DH is seasonably weaker). I can wax lyrical about DTL for a long time, because I think it will continue to create value for shareholders for ehyars to come. That the company has grown revenues over the past 6 years from $175m to $600m, EBITDA from $5.7m to $16.2m, NPAT from $3.4m to $10.6m, and DPS from from 15cps to 56cps, and all this without a single dollar of recourse to shareholder funding, bears testimony to its wealth-creating pedigree. (I challege anyone find a company with that sort of growth track record and with share capital that has remained as stable as DTL's over time....$8m in 2003 and $8.3m today). The only trouble with investing in DTL is getting set; the stock is notoriously illiquid for investors who don't have access to lines of stock.