5G Boom to Aid These Stocks Score Big in 2020

  • Jan 28, 2020 AEDT
  • Team Kalkine
5G Boom to Aid These Stocks Score Big in 2020

Nowadays, people, businesses as well as governments across the world ask for uninterrupted network and faster downloading speed. This need is to be soon addressed by 5G technology. The recent boom in 5G technology will earn profits for smartphone developers and telecommunication companies as people dispose of legacy technology to receive enhanced services.

The 5G network execution suggests a wide range of prospects for the key players in the room, especially due to the ever-increasing requirement in 5G technological enhancement. Consequently, technology-based companies are the largest beneficiaries of the evolution in 5G structure.

Hereafter, it is vital for investors to keep a track in specific sectors in the technology space that are well poised to grow, on the back of benefits associated to 5G products and services.

5G: A Brief Discussion

5G is best described as the next-gen, or 5th generation cellular network technology of mobile networks that functions ahead of LTE mobile networks. 5G will improve the mobile network to interconnect people, machines, devices and objects. The budding technology is expected to offer robust implementation and efficiency which in turn will boost customer experiences and connect innovative industries.

The latest 5G New Radio air interface will boost OFDM to provide a higher degree of scalability and flexibility. The 5G New Radio software will provide faster and enhanced mobile broadband services than 4G LTE. Further, it will also aid and expand immense IoT connecting devices and mission-crucial networks.

Notably, 5G network is well equipped to offer multi-Gbps peak rates, enormous capacity, ultra-low latency, coupled with more consistent user experience.

Prospects of 5G Infrastructure Market Appears Sunny

Imagine a situation, where you have access to the quickest Internet connection, but your smartphone cannot utilise it? In this case, bulk of the population will dispose of their old phones and purchase a brand new upgraded one.

According to experts, the 5G infrastructure market is predicted to reach ~$48k million by 2027, up from ~$780 million in 2019. This represents an increase of 67% on a CAGR basis. 5G comes with shorter lag time, which is the most important reason for the initiatives to implement it worldwide.

Additionally, growing application of virtual networking architecture and expansion in mobile data traffic in telecom space are also foremost factors enhancing the 5G infrastructure industry currently.

Smart Cities to get Revolutionised: Thanks to 5G

The concept of “smart cities” is rising on the back of extensive application of 5G. The robust adoption of this perception is changing the way towns and cities operate technologically, which in turn helps the cities to modernise in real-time basis.

This revolution of smart cities means that traffic lights could control themselves based on the number of vehicles and streetlights could light up or turn off by detecting if there are people on the footway. Additionally, surgeon will be able to operate on a patient from distance through the assistance of a wireless network and a robot.

To our knowledge, the signs of acceptance of 5G for smart cities have already commenced.

For example, in Barcelona, the sensor-embedded parking spots is now connected with an app that instructs drivers to available spaces to park their cars easily. Projects are also ongoing in cities which includes Amsterdam, Stockholm, Columbus and Copenhagen to achieve the smart city concept.

Effective execution of 5G networks is likely to boost download speeds and ensure intricate activities engaged in the functioning of smart cities. Hence, real-time data-reliant companies such as Uber Technologies, Spotify Technology, streaming service providers such as Netflix and The Walt Disney Company will find it easier to operate more effectively.

Markedly, with increasing competition in the 5G spectrum on a worldwide level, market experts believe that by 2020, most countries including Canada, South Korea, Asia, UAE and the US have the potential to be the first receivers to have access to the 5G network.

5G Adoption in Australia

As per the Department of Communications and the Arts, the Aussie government believes 5G to be greater than a significant wave for mobile communications, building the underlying foundation that would ease the next wave of productivity and modernisation across sectors.

Australia remains well positioned to delve into and use the prospects provided by the 5G network, given the wide and lucrative competitive mobile communications market. The trails of 5G had begun in Australia in 2017, with major contributions offered by the government.

The Australian Communications and Media Authority (ACMA) is in process to ensure that Australia is well positioned to take benefit of the 5G opportunities. The country already has 4G of world-class level and third-world broadband, therefore 5G is viewed upon as the greatest knock in the region.

3 Stocks to Consider

We have selected three stocks that are in decent position to gain from the growing implementation of 5G technology.

5G Networks Limited (ASX: 5GN)

5G Networks Limited is engaged in providing a broad range of digital business solutions. The company aims for establishing a profitable digital world and deliver an end-to-end digital service for enterprises.

December Quarter Highlights: On 14th January 2020, 5G Networks Limited announced an update for the December 2019 quarter. During the quarter, the company generated net operating cash flow of $1.974 million. Net cash used in investing activities came in at $0.845 million, whereas net cash used in financing activities stood at $1.383 million.

The company’s cash and cash equivalents stood at $2.813 million at the end of the quarter. For the coming quarter, cash outflow is anticipated to be approximately $12.414 million.

The company reported cash receipts of $14.6 million during the period and $28.1 million in the half year period, suggesting a growth of 19% from the year-ago quarter.

Outlook: For FY2020, the company expects revenue to be in the range of $55 million to $65 million and EBITDA is predicted to rise to 8% -12% (excluding the latest buyouts).

Stock Performance: 5G Networks has a market cap of $57.05 million with ~ 65.58 million outstanding shares. The stock traded at $0.835 as on 28 January 2020 (2:00 PM AEDT).

Superloop Limited (ASX: SLC)

Superloop Limited is engaged in providing telecommunications infrastructure and managed services.

Key Financial Highlights for the FY19 Ended 30th June 2019: In FY19, the company delivered total revenue of $119.8 million, an increase of 1.4% year over year. Gross margin in dollar terms stood at $58.5 million, down from $67 million reported in FY18.

EBITDA for the period decreased from $22.1 million in FY18 to $8.5 million in FY19. The decline was primarily due to lower subsea development margin, fixed wireless margin and high operating expenses.

The company reported operating cash flows of $5.3 million for FY19, down from $37.9 million in FY18. Net cash flows for the period stood at $18.9 million. Net debt at the end of the period came in at $70.3 million.

What to Expect: The company expects underlying EBITDA to be around $14-$16 million for FY20. The positive outlook has been primarily due to robust growth in core fibre connectivity business and complimentary offerings returning to growth.

In FY20, the company anticipates concentrating more on implementing master service agreements, contracts and orders to offer higher connectivity and broadband services to consumers and believes to drive operational efficiency.

Stock Performance: Superloop Limited has a market cap of $340.26 million with ~ 340.26 million outstanding shares. The stock traded at $0.905 as on 29 January 2020 (2:00 PM AEDT).

Telstra Corporation Limited (ASX: TLS)

Telstra Corporation Limited is involved in offering telecommunication and information services, which consist of internet, pay television and mobile-based services. It is Australia’s leading technology and telecommunication plater which provides about 18.3 million retail mobile services, 1.4 million fixed separate voice services and 3.7 million fixed bundles and individual data services.

Rides on T22 Strategy Implementation & Expansion of 5G: Recently, Telstra Corporation established that the T22 strategy is implementing various services that are transforming business for the customers. These services include delivering cost reductions initiatives and simplifying the overall business structure. The mobile business of the company is continuing to return to a more rational market as the company progresses through the advancement of 5G.

What to Expect: In FY2020, the company anticipates capital expenditure to be between $2.9 billion- $3.3 billion. Total income is likely to be around $25.3 to $27.3 billion in FY20. The company expects underlying EBITDA to be in the range of $7.4 to $7.9 billion.

Stock Performance: Telstra Corporation has a market cap of $46.15 billion with ~ 11.89 billion outstanding shares. The stock traded at $3.890 as on 28 January 2020 (2:00 PM AEDT).


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