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5G Networks share price up on data centre deal

5G Networks Ltd (ASX: 5GN) shares are up 7 per cent to 90 cents today after it announced a deal to buy Australian Pacific Data Centres Pty Ltd (APDC) for $3.5 million in cash.

The deal is priced at 7x EBITDA with 5G Networks reporting the acquisition target has $1.7 million in annualised contracted revenue. It also expects to extract $500,000 per year in cost savings from the acquisition by the second half of financial year 2020.

5G Networks now has a market value around $52 million based on 40 million shares on issue and another 18 million unquoted shares on issue according to its latest Appendix 3B regulatory filing. 

For the financial year ending June 30 2019 it posted a net loss of $4.1 million on revenue of $51.15 million. It also paid a final dividend of 1 cent per share on $320,000 in full year EBITDA or operating income. 

The company provides data centre, hosting, and internet connectivity services and has pursued an aggressive acquisition strategy to deliver shareholder growth. The strategy has stoked volatility in a stock that has swung wildly between 38 cents and $1.72 over the past 52 weeks.

Larger rivals providing similar cloud and dark fibre services include NextDc Ltd (ASX: NXT) and TPG Telecom Ltd (ASX: TPM).

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Motley Fool contributor Tom Richardson owns shares of TPG Telecom Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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