TD SYNNEX

SNX Detail

TD SYNNEX (NYSE: SNX) (previously known as SYNNEX Corporation) offers various distribution, logistics and integration services for the technology sector. SNX distributes peripherals, information technology (IT) systems such as data center server and storage solutions, system components, software, networking/communications/security equipment, consumer electronics (CE) and complementary products. Pursuant to the closing of a merger between SYNNEX Corporation and Tech Data Corporation (TDC) on September 01, 2021, the company changed its name to TD SYNNEX.

Merger to Become a Leading IT Company: On September 01, 2021, SNX announced the completion of the merger with TDC, an IT products and services distribution company previously owned by affiliates of Apollo Global Management, Inc. and their co-investors. With the closing, the combined entity now operates under "TD SYNNEX" and offers a comprehensive portfolio of high-value products and services to over 100 countries in the Americas, Europe, and Asia-Pacific. Under the merger agreement, Apollo Funds received an aggregate 44 million shares of common stock plus a net USD 1.1 billion in cash and now owns ~45% of the combined entity after considering a USD 500 million equity contribution by Apollo and the refinancing of Tech Data net debt.

Q2FY21 Results: The company reported YoY growth of 31% in revenue to USD 5.86 billion in Q2FY21 (ended May 31, 2021) compared to USD 4.47 billion in Q2FY20. Net income for Q2FY21 increased to USD 93.10 million from USD 56.96 million in Q2FY20. As of May 31, 2021, the company had cash & cash equivalents of USD 1.66 billion and total debt of USD 1.56 billion.

Key Risks: In Q2FY21, SNX's one customer accounted for 25% and 20% of its total revenue and account receivables, respectively. In addition, revenue from the sale of products purchased from HP, Inc. represented ~13% of the total Q2FY21 revenue. As a result, the loss of such vital customers and suppliers could adversely impact the company's financials.

Outlook: In Q3FY21, SNX expects to generate total revenue in the range of USD 4.95 – 5.45 billion, along with a net income of USD 84.2 – 94.7 million and USD 99.9 – 110.4 million on GAAP and non-GAAP basis, respectively. It also expects its GAAP EPS to range between USD 1.60 – 1.80, along with a non-GAAP EPS of USD 1.90 – 2.10.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SNX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: SNX's stock price has increased 43.13% in the past nine months and is currently close to the higher end of its 52-week range of USD 61.97 to USD 130.93. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 31.48. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 95.05. Considering the significant uptick in the stock price, we believe the current price adequately reflects the business fundamentals and recommend a "Sell" rating on the stock at the current price of USD 116.39, down 2.14% as of September 14, 2021, 2:43 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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