It’s been nearly three months since I last visited Synnex (NYSE:SNX), and it appears that my original bullish theses has been validated. Since that article, the shares have rocketed up by 24.6%, far-outpacing the 5.5% return of the S&P 500 (SPY) over the same timeframe. In this article, I show why I believe Synnex continues to be an attractive value play in the tech sector.
Before we begin, it should be noted that Synnex intends to spin off Concentrix, its digital transformation and marketing business, on December 1st, with current shareholders owning shares in both companies. For the purposes of this article, I evaluate Synnex in its current form as a consolidated entity.
(Source: Company website)
A Look Into Synnex
Synnex Corporation is a leading technology distribution, logistics, and integration services company with a presence on 6 continents and 40 countries. It has over 400 OEM partners, and distributes over 40K technology products across 25K resellers, systems integrators, and retailers. This massive scale, along with 225K employees, is what helps make Synnex a Fortune 200 company (ranked #130 in 2020). Synnex generated over $23 billion in revenue over the past 12 months, and it’s had 133 consecutive profitable quarters.
Synnex has two business segments, with the first being TS (Technology Solutions), which handles the aforementioned activities in the preceding paragraph, and Concentrix, which is its digital transformation and marketing business. The operating income split is about even between the two segments, with 52% going to TS, and 48% going to Concentrix.
Looking forward to the Concentrix spin-off, I see it as being a shareholder friendly move, as it allows for the separate companies to focus on their core competencies, given that these two businesses are very different from one another. In addition, I see it unlocking shareholder value, as Concentrix is a higher margin business with
