5G Networks Limited (ASX: 5GN) is a company from the telecommunication sector and engaged into the network rollout and ICT services. On 2 April 2019, the company announced the acquisition of Melbourne Data Centre (MDC) located in the heart of Melbourne CBD for $5.7 million.
At present, Melbourne Data Centre is operating at 40% capacity. In order to achieve more effective data centre utilization, it is important to meet the demand of the existing customer, which will be the driving factor for profitable revenue growth. This profitable revenue growth will result in considerable EBITDA returns, that will be generated through the data centre services.
The purchase price (7 times EBITDA multiple) of the data centre is $5.7 million, that consists of $1 million in cash on completion, along with issuing of shares worth $1.75 million. In the first year, the vendors will be receiving a total of $550,000 that will be paid quarterly. In the second year, a payment of $1.250 million will be made to the vendors, and in the final year, the vendors will receive $1.15 million.
The announcement highlighted that after the acquisition of the MDC, the company expects that they would be able to realize the annualized synergies of $600kpa in the span of the initial three months period. This acquisition represents the strategic expansion of 5GN infrastructure footprint, and it will also strengthen its current product portfolio by enabling seamless access to the 5GN Cloud through the 5GN Managed Network offering. The infrastructure investment would be able to open substantial opportunities for the ongoing growth of revenue, cost savings and efficiencies.
The Data Centre facility has the capacity to hold 330 racks with Tier 4 N+2 design, with ISO accreditation, as well as onsite security surveillance. With the recent launch of the National high-speed data network, this acquisition will form an integral addition to the infrastructure investment of the company.
On 21 March 2019, the company notified the market about the launch of National Data Network, aimed towards meeting demand driven by digital transformation.
On 25 February 2019, 5G Networks declared its half-yearly results for the period ended 31 December 2018. The period reported a significant increase in the revenue from its ordinary activities by 1,979% to $23.576 million. The EBITDA went up by 632% to $0.689 million. However, the company made a loss of $1.460 million.
On 23 January 2019, the company declared its Q2 results where an exponential growth was seen in the quarterly cash receipts. In 1H FY2019, the cash receipts were of $22.8 million from $1.3 million in the previous year. Q2 reported a strong sales performance, where the company was able to secure $11 million of new, as well as retained revenue.
In the previous six months, the stock has given a return of 77.66%. There was an improvement in the YTD performance of the stock, where it generated excellent return of 98.81%. Post the acquisition news, the share price of 5GN zoomed up by 8.383% on 2 April 2019 and managed to hover around its 52- weeks’ highest price.
By the end of the trading session, on 2 April 2019, the closing price of the stock was A$0.905, up by 8.383% as compared to its previous closing price. The company has a market capitalization of A$42.76 million with approximately 51.22 million outstanding shares.
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