In Brief: Dicker Data, Catapult & Aspen Group

This story features DICKER DATA LIMITED, and other companies. For more info SHARE ANALYSIS: DDR

The company is included in ASX300, ALL-ORDS and ALL-TECH

This week’s In Brief highlights the beneficiary of an interest rate easing cycle; a technology growth stock and  a property investment/development group in the geographical sweet spot.

-Dicker Data’s margin dip
-Catapult International powering ahead
-Aspen Group in the sweet spot of property values

The quote of the week comes from Morgan Stanley: 

“(…) we think that de-escalation [between US and China] reduces the risk of a sudden stop in trade volumes and a sharp rise in the unemployment rate. That said, it virtually locks in an environment of slow growth and firm inflation.”

Dicker Data’s AI margin retreat

The market turned its nose up at the AGM trading update from Australia’s number one specialist technology hardware distributor Dicker Data ((DDR)), sending the stock down almost -6% by the close of trade on Wednesday.

Analysts take a slightly more nuanced interpretation of the latest update on sales momentum, albeit both Goldman Sachs and Jarden have trimmed EPS estimates and target prices.

The nub of the problem for Dicker Data lays in the slower-than-expected recovery in demand and macro conditions impacting more than anticipated on small and medium-sized businesses across Australia.

For the calendar year-to-date, gross sales rose 17.4% due to a higher contribution from enterprise sales. This was actually better-than-expected following 10% growth in the previous period and 8.3% growth in 1H25.

Jarden emphasises the result was also achieved in a period of election uncertainty and with different timing of Easter holidays and Anzac Day which would have weighed on April sales this year (instead of late in March).

Margins were lower than forecast, with a large AI deal diluting gross profit margins to 9.1% from 10.1% the year previously.

With the RBA cutting rates for the second time this year, Dicker Data is highlighted by both brokers as positioned for recovery in demand assisted by the local rate easing cycle.

Net interest expense is forecast to decline, as the company has a variable rate debt profile, and as demand rises.

Margins for SMEs are also expected to normalise with an ongoing recovery in the PC and networking cycle.

Higher-margin AI PCs are also becoming a larger proportion of total PC sales.

Goldman Sachs notes the Windows 10 refresh cycle is leading to an uptake of higher-value devices.

Management at Dicker Data does anticipate profit before tax margins to improve to the mid-3ppts as the year progresses, against the 2.9% reported year-to-date.

Jarden trims EPS estimates to account for the softer-than-expected update, as does Goldman Sachs. Target price slips to $10.88 from $11 for Jarden and by -8% to $9.08 for Goldman Sachs.

Jarden is Buy-rated and believes Dicker Data is at an earnings inflexion point.

Goldman Sachs is Neutral-rated with the expectation of improving demand throughout the rest of 2025.

FNArena’s consensus forecasts, based on modeling by UBS and Morgan Stanley, suggest Dicker Data shares are currently yielding 5.6% and 6.1% from prospective dividend payouts in respectively FY25 and FY26.

The first interim dividend for FY25 was paid out earlier this month.

Catapult filled with healthy stamina

Catapult Group International ((CAT)) enjoyed a target price upgrade from Canaccord Genuity after releasing a robust FY25 earnings report.

Annual contract value rose 18% to US$101m with Performance and Health generating US$65m, up 17%, and Tactics and Coaching at US$33m, a rise of 18%.

Total revenue advanced 19% year-on-year, closely tracking growth in annual contract value, while lower-margin Media revenue capped gross profit margins at 81%, flat on the previous year, with a slight rise in other variable costs.

Management handled operating expenses well, rising by 6% only.

Canaccord believes the company generates “best-in-class” metrics that reflect the quality of Catapult. Cross-selling activity included more sporting teams adopting new video solutions.

A lightly elevated churn rate at 4.3% and a slightly softer annual contract value retention were attributed to the cessation of the Russian operations.

Positively, management is expanding into new sports and regions, with wins in soccer across EMEA and LatAm markets, alongside a pick-up in baseball and basketball in North America.

The launch of next-gen Vector 8 platform, with an April rollout, is expected to drive more exposure into new and existing sports.

Tactics and Coaching, including video solutions, evidenced annual contract revenue growth for New Video Solutions of 42% with the latest video product suite.

The latter division is flagged as the bulk contract revenue driver for the company to US$200m, with vertical teams anticipated to experience accelerated growth.

Cash flow generation is expected to continue to grow, with management flagging “higher free cash flow” over FY26, paving the way for bolt-on acquisition opportunities.

Management at Catapult has a rule-of-40 as its north star aim and achieved a rule-of-21 in FY25.

Canaccord maintains a Buy rating with an upgraded target price to $5 from $4.20, incorporating a compound average growth rate in revenue of 19% and longer-term earnings before interest and tax margins of 30%.

Aspen’s premium not a turn-off

Moelis doesn’t shy away from Aspen Group’s ((APZ)) 41% premium to net asset value post the recent $68m equity raising via an institutional placement at $2.90 per share, a 26% premium to net asset value. 

The raising includes a $4m top-up from the share placement plan, alongside the sell down of its remaining 13% stake in Eureka Group Holdings ((EGH)) for $27.5m, the aftermath of a previously failed take-over attempt.

The capital inflows have lowered gearing to 13% from 27%, which increases optionality for future growth.

By way of context, Aspen is an investment and management group specialising in providing affordable accommodation solutions across the country.

The company focuses on serving approximately 40% of Australian households with annual incomes under $90,000, offering housing options priced at or below $400,000 or with weekly rents under $400.

The analyst points to the recent tours of the WA and SA portfolios, which represent around 60% of the total property assets. Strategically, Aspen usually acquires assets at a sizeable discount to replacement cost and holds them at accrued cost until the development is finished.

Moelis believes there is considerable embedded value in the portfolio against the open market valuations, which could be realised.

Post the property tour, the analyst estimates the fair value of the portfolio at $2.98 per share and stresses the realisable value of assets to be “materially” above the book value.

For example, additional value could be unlocked by selling the Perth Apartments, which constitute around 60% of the WA assets (WA at 46% of total assets) as part of a strata structure. Moelis explains Perth has one of the tightest occupancy rates for any residential market in Australia at just 0.7%.

Rental growth remains at circa 6% compared to a plateauing across the rest of Australia, while average dwelling values have risen 33% in the last two years.

Moelis believes the premium attached to the stock is justified given Aspen’s track record of achieving 21% return on equity over the last 4.5 years.

The property tour has resulted in a rise of the broker’s target price to $3.83 from $3.30 and a maintained Buy rating.

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