5G Networks Limited (ASX: 5GN) operates in the telecommunication services sector and is engaged in the operations of providing services oriented to data networking, cloud and hosting, etc. The company has a culture, which is firmly centred around people, collaboration and trust.
The company today, on 5th April 2019, provided an update on the acquisition of the Melbourne Data Centre, which is in the prime Melbourne CBD location. It has a capacity for 330 racks, and the current utilisation is at 40% capacity. It has a significant revenue opportunity through effective data centre utilisation. The centre has a 24/7 onsite security surveillance, with Tier 4 N+2 design and ISO accreditation.
The annualised revenue from the acquisition of the Melbourne Data Centre is $3 million. The annualised synergies to be realised within the first three months amounts to $600k. The utilisation of the data centre currently is at 40%, which represents a significant revenue opportunity, if the company unlocks the rapid growth of 5GN data centre services. The product portfolio of the company gets strengthened from the acquisition, also enabling wholesale opportunities to be explored. The purchase price of the acquisition was $5.7 million, which consists of $1 million in cash and $1.75 million in issued shares (5-day VWAP); $2.95 million in cash will be paid over the next three years.
The company’s strategy is focused on three levers for growing shareholder value; integration, cross-sell, up-sell for customer revenue growth and acquisitions. The acquisition strategy of the company is guided by a disciplined approach to discern true financial value and quickly identify operational synergies.
As per the second quarter results of FY19, the company experienced exponential growth with a quarterly cash receipts of $14.25 million, an increase of 67% from the previous quarter. The cash receipts for the half-year of FY19 stood at $22.8 million as compared to $1.3 million in the previous year. The company had strong Q2 sales performance, which secured $11 million of new and retained revenue.
In accordance with the corporate strategy, the company continued its exploration on several accretive acquisitions. The market sentiment for progressing merger and acquisition opportunities remains positive.
The future capital investment is expected to be funded through internally generated cash flow. The CapEx was tightly controlled at $138k for the quarter and $398k for the half-year period. Future CapEx will be driven by customer growth. The company continued development of network access and infrastructure. Moreover, the nationwide high-speed network remains on track for launch in the second half of FY19. The fixed wireless projects of the company also progressed as per plans with the successful network expansion into the city of Dandenong.
On 5 April 2019, the company announced that the securities of 5GN will be placed in trading halt at the request of the company, pending an announcement in relation to a capital raising. The shares of 5GN will remain in trading halt until the prior of the commencement of normal trading on April 09, 2019 or when the declaration is discharged to the market.
5GN’s shares last traded at a price of $0.935 with the market capitalisation of ~$47.89 million. The stock has generated significant return of 122.62% on YTD basis. Its 52-week high price stood at $1.015 with an average trading volume of approximately 134,748.
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