Table of Contents
Investment thesis .............................................................................. 3
Outlook: Waiting for clarity on operating margin improvements ..............................................3
Valuation: Expect shares to trade in line with historical 12x P/E ...............................................3
Risks ........................................................................................................................................3
Key themes......................................................................................... 4
Sizing the distribution market....................................................................................................4
Component distribution – Driven by semiconductor cycles......................................................4
Product distribution – Driven by medium-sized businesses......................................................6
Bought versus sold: difference between broad-line and value-add ..........................................7
Stock performance linked to operating margins .......................................................................8
Potential operating margin pressure with move to Asia .........................................................10
The importance of ROIC and ROCE........................................................................................11
Stocks typically track each other and trade at similar valuations.............................................12
Acquisitive strategy to continue..............................................................................................13
Industry overview............................................................................ 15
Defining the supply chain players ...........................................................................................15
What are distributors?.............................................................................................................16
Two segments of the IT distribution market ...........................................................................16
Defining the channel ...............................................................................................................17
Competitors ..................................................................................... 18
Avnet......................................................................................................................................18
Arrow Electronics....................................................................................................................18
World Peace Group.................................................................................................................18
Future Electronics ...................................................................................................................19
Ingram Micro..........................................................................................................................19
Tech Data...............................................................................................................................19
Bell Microproducts..................................................................................................................19
Westcon Group.......................................................................................................................19
Synnex ...................................................................................................................................20
Arrow Electronics ............................................................................ 22
Avnet ................................................................................................ 38