5GN Networks Limited

Business Update: 5GN Networks Limited (ASX: 5GN) is a licenced telecommunications carrier and focused in providing its customer's data connectivity, cloud and data services. The company’s securities have been placed under suspension from quotation from 12 November 2021. This follows the lodgement of the Federal Court of Australia orders with ASIC and approving the scheme of arrangement through which Webcentral Group Limited will acquire all of the issued shares in 5GN.

• On 16 July 2021, Webcentral and 5G Networks entered into a Merger Implementation Agreement through a scheme of arrangement.
• Under the proposed scheme 5GN shareholders will receive 2 Webcentral shares for every 5GN share held. The record date of the scheme was 16 November 2021.

Approval of Scheme of Arrangement by 5GN Shareholders:

On 8^th November 2021, the company has announced that its shareholders have approved the proposed merger between 5GN and Webcentral Group Limited.

• 75% of the company’s shareholders in number present and voting at the Scheme Meeting, voted in favour of the resolution.
• 61% of the total number of votes cast on the resolution by the shareholders at the Scheme Meeting present, voted in favour of the resolution.

Implementation of the Scheme:

The indicative time and dates for the scheme implementation are mentioned below:

Key Dates (Source: Analysis by Kalkine Group)

FY21 Performance Overview:

• During the year the company delivered revenues of $87.08 million, compared to $49.32 million in the previous year.
• Loss after tax widened to $5.86 million in FY21, compared to a loss of $1.54 million in FY20.
• On 28 October 2021, the Group acquired ~50% of the shares of Webcentral Group Limited, following an off-market takeover.
• It ended the period with decent cash position of $19.2 million as of 30 June 2021.

Key Risks: The company and its shareholders are faced with the risk of challenges in post-merger integration.

Outlook: The merger of Webcentral and 5G Networks will result in the creation of a larger entity and enhance organic as well as inorganic growth of the combined entity. The Group is also expected to achieve revenue synergies through cross-sell and up-sell opportunities, and also achieve cost synergies of $2 million from the consolidation of the operating platform. Further, corporate cost rationalisation and labour synergies are expected to drive over 20% EBITDA margin.

Stock Update: The stock of 5GN last traded on ASX on 12 November 2021, following the suspension from quotation. As per ASX, the stock of 5GN was last trading below its 52-weeks’ average levels of $0.85-$1.635. The stock of 5GN gave a positive return of ~1.06% in the past one month, prior to the suspension as on 12 November 2021. 5GN share was last traded at the price of $0.945. 5GN shareholders will receive two Webcentral ordinary shares for each 5GN share held at the Scheme record date (16 November 2021) and 5GN will become a wholly owned subsidiary of Webcentral. WCG closed at the price of $0.495, as of record date of 16 November 2021. Hence, considering the aforesaid arrangement, 5GN position has been closed. The commencement of trading of new Webcentral shares will be from 24 November 2021.

5GN Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings.

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