Dicker Data (ASX:DDR) is now a $2 billion company.

In its FY20 results announced last week, the 42-year-old Australian-owned and operated tech hardware, software and cloud distributor noted total revenue surpassed $2 billion for the year. That’s an impressive increase of 13.6 per cent.

It added eight new vendors last year ($9.8 million worth), while increasing its existing vendor business by $230.5m (up 13.1 per cent).

Imagine telling your mum in 1979 that all those 0s and 1s she sees on your TI 99/4 could one day be sold for a couple of billion dollars a year.

Yet here it is – Dicker Data is no doubt one of the best performing stocks in the ASX data services sector.

Its share price has rocketed by 70% in the last 12 months, and an astonishing 5,900% since its initial IPO listing in 2011. In other words, investors who had put money down on that IPO those years ago would have seen a nearly 60-fold increase today.

The stock reached its all-time high of $12.38 at the start of this month, and while it has dwindled a little to $10.82 yesterday, the latest financial data in October showed that the company was delivering on all metrics. Revenue was up by 18% to $1,006 million, which translated to an NPAT of $29.4 million, up by 24% on pcp. Of importance was its recurring software revenue, which grew by 53.1% to $224 million.

Fund managers have also been taking notice, with Oracle investment manager, Luke Winchester, naming Dicker Data as one his top picks for 2021.

Tech shares on the ASX have had an incredible run in the last 12 months, becoming the biggest beneficiary in a year headlined by the coronavirus pandemic.

A significant number of these shares have seen double digit growth – with market darling Afterpay (ASX:APT) leading the pack, returning well over 200%.

Pushpay (ASX:PHP) and Xero (ASX:XRO) have also had their fair share in the sun, returning a stellar 85% and 77% respectively – as the ongoing pandemic moved people’s working and social habits to online.

But data services may be one segment in the sector that investors might have overlooked. These are the companies doing the unsexy grunt work behind the-scenes – providing things like data centres, cloud servers, and hardware.

Companies that share the sector with DDR, such as Megaport and NextDC, have seen their share prices rising significantly over the last 12 months.

Look:

ASX data service companies over the last year

Code Company Price MktCap %Yr
NXT Nextdc Limited 11.14 $5.1B 49
DDR Dicker Data Limited 10.74 $1.8B 79
MP1 Megaport Limited 12.96 $1.9B 16
DC2 Dctwo 0.325 $11.3M 65
DXN DXN Limited 0.017 $18.0M -51
NNG Nexion Group 0.285 $18.8M 43
NXL Nuix 6.33 $1.9B 19

 

Market share growth

In recent years, DDR has been targeting distribution agreements in software and high-end enterprise products including cloud computing. As a result, Dicker Data has catapulted itself into the third biggest distributor in this space nationally, commanding a 20% market share just behind market leaders Ingram Micro and Synnex (both unlisted).

Just three weeks ago, Dicker Data was the appointed as the newest Australian distributor for the giant US cloud, networking, and security vendor, VMware – following a 16-month long tender process.

Chairman and chief executive officer, David Dicker, hailed the deal saying that the partnership will be a “significant source of growth” for the company in FY21.
 

What’s ahead

Dicker has plans to push the company’s revenue towards the $2 billion mark this year – and he’s halfway towards completing that feat, having already delivered $1 billion in the first half.

In an interview with ARN, Dicker said he won’t be drastically changing the way the company does business in order to reach that goal. Improving efficiency, customer service, and executing strategies better will still be the main focus.

“The key to success there is to have a better strategy and execute better. All that’s pretty easy to talk about, but it’s not quite so easy to do.”

Modest words, because judging by what he’s achieved in the past 10 years, it would take a brave man to bet against him.

But plenty are now seeing what Dicker sees. Here’s a roundup of ASX small caps aiming to emulate Dicker Data’s success.
 
Nuix (ASX:NXL)
Nuix offers data forensics services to more than 1,000 clients globally, with the self-proclaimed vision to “find the truth from any data in the world”. Founded in 2000 by its chief scientist David Sitsky, the business began to scale rapidly in the mid 2000s, eventually listing itself on the ASX in December 2020.

The shares debuted at $5.31, but jumped by 50% to $8.01 at closing that day.

It hit some headwinds late last week after releasing its maiden result, shedding some 32 per cent off its valuation and dropping to $6.06 after noting “US election-related sales challenges”.

CEO Rod Vawdrey told the AFR he was confident the company would still meet its full-year prospectus forecasts.

NextDC (ASX:NXT)
NextDC manages 11 data centres across Australia, and has seen a 50 per cent move in its share price over a 12-month period. This growth has led to the company upsizing its senior debt facilities from $350 million to $1.85 billion back in November. The company expects the growth to continue in FY21, forecasting EBITDA to be between $125 million to $130 million, up 20% to 24% on FY 2020.

Nexion (ASX:NNG)
Nexion is a newcomer, and is a provider and creator of OneCloud – a hybrid cloud service that combines private and public cloud infrastructure. The company made its entrance to the ASX recently on February 18, following an oversubscribed IPO at 20c per share. It’s currently trading at 27 cents.

Megaport (ASX:MP1)

Megaport has seen its shares rise by 9% in the last 12 months. The company is a provider of elastic interconnection services across its data centres. It allows clients the flexibility to manage bandwidth usage. At peak times, consumers can scale up bandwidth when demands are high, and reduce it during off-peak periods. 

The move to online work during the pandemic restrictions has bode well for the company.