For those who have never heard of it, Dicker Data Ltd (ASX: DDR) is a small-cap wholesale distributor of computer hardware and products to the Australian market. It has existing arrangements with Hewlett-Packard ("HP"), Cisco, Toshiba, Lenovo, Microsoft, ASUS and several other major brands to distribute their products to resellers.
This morning management announced it has also been authorised as a distributor for computing giant Intel, adding the company's SSD (solid-state hard drives), NUC (ultra-small processors), 2-in-1 tablet/laptops and server-related products to its stable.
It's a boost for confidence in the company after long years of working closely with Intel, and appears to provide upside without risk as Dicker Data can leverage its scale and existing network of resellers.
As a supplier to resellers, Dicker Data appears partly insulated from fluctuations in consumer confidence, but given that its profits depend on maintaining high volumes this protection shouldn't be relied on too far. More compelling are the results, with the business growing revenue by 123% and underlying Net Profit After Tax (NPAT) by 130% in the first quarter of this year.
This was partly thanks to an acquisition last year, however, management notes that significant cost savings should also be realised, boosting profits. Company revenue is expected to reach $1 billion this year.
Dicker Data certainly looks set to perform well over the next 12 months, however despite today's positive update I am cautious about the company's super-low profit margins and would personally wait for a price I can't refuse before buying into this company.