News Update: DXC
Reuters article mentioned that Atos had made a formal approach to DXC made this week at more than $10 bln including debt -sources.
We started buying DXC at USD 15.2 and had been buying all the way up to USD 20.22. Today, it is at USD 28.91. Our average price is at USD 17.03.
For the 10 people who managed to get a peek of our pitch on DXC and did a purchase during our free sneak peak promotion exercise in November, congrats on your diligence.
Please read our initial thesis on DXC on Sep 4th 2020 and our recent update on Nov 19 2020.
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The first reaction we have of the news is of despair. We have a feeling that Salvino will push for the deal to be done. This is a quick win for him. We would like to own DXC for the long term, but we should not be complaining if we make a quick win within 4 - 12 months.
We are also sure that Salvino would be working hard to shop for another bidder.
In the Reuters report, they had reported that DXC is in a low margin business. We believe that is a fallacy that the press had choose to believe in. Look at where DXC is going and you will quickly realise that they could really move their margins up when they onboard more capabilities in areas of growth.
Their capabilities are becoming more critical as big business become more digitised. If DXC financial become closer to what Accenture and EPAM are doing, we will have a multi-bagger in hand in a few years.
As such, we will be holding on to DXC as we await on the progress of the takeover.
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