Valuation based on 28c EPS and 12% growth rate for next 5 years with PE of 25. (PE of 25 is in bottom quartile of its trailing 5 year history.)

Why do I own it?

# Mid cap and market leader which provides IT hardware and software from mostly Microsoft to predominantly commercial and government customers across Australia and NZ. Also provide support services.

# Has 10 years of 20% p.a. earnings growth

# Founders have all exited the business now as it was created 45 years ago. But still has a strong founder like mentality with insiders holding 15% of the company and the "new" CEO having worked at the company for 28 years before his appointment this year!

# Strong staff engagement across their 1400 employees, with average tenure of over 5 years and consistently awarded as an employer of choice.

# Consistently high ROE / ROC of over 50 / 40% as it's a capital light operation.

# Acceptable MOS at current price of $7.85 in Feb 2024 at almost half the previous growth rate.

# They can deliver double digit revenue and earnings growth for 5 + years so the return should exceed my 15% p.a. + target

# They were recently added to the ASX200 providing indexing tailwinds to the historical multiple.

# Probably has structural tailwinds as Australia keeps growing and spending more on IT / AI and in particular cyber and security products that have been a source of good growth in recent years.

What to watch

# Low net profit margin of 1.5%. This is probably a moat though as given their large volume it will be tough for competitors to undercut them. They have been able to maintain this for many years now.

# Any significant change or approach from the new CEO and new Chair, that may add risk or distractions to what is a well proven business model.

# Loss of supply/service contract with major suppliers, especially Microsoft.