NetComm Wireless Limited
Proposed merger scheme evidently lucrative for investors: NetComm Wireless Limited (ASX: NTC) designs, manufactures and distributes communication and networking devices including analogue modems, wired and wireless networking devices, routers and ADSL modems. The Company distributes its products to retailers, telecom carriers and Internet service providers. Recently, the group has released its 1H FY19 results wherein revenue was up by 6 per cent and amounted to $94.7 Mn in 1HFY19 over the prior corresponding period. This expansion in revenue was underpinned by strong Fixed Wireless and Network Connection Device (NCD) orders, while strategic investments made in 5G positioned the company extremely well with regards to this exciting technology. The Company continued to roll out contracts to domestic and global customers. Moreover, the company recorded a reported EBITDA of $8.3 Mn for the first half of the year 2019,witnessing a 9.6% fall as compared to the prior period. This fall was indicative of the company’s changed sales mix, with NCD sales having a lower margin than Distribution Point Units, as well as higher operating expenses in part related to developing the company’s 5G capabilities. These expenditures on the 5G technology are slated to fuel the next phase of the company’s growth.
Moreover, the company’s position statement remains strong, with $17.4 million in cash, no debt and $30 million in unutilised committed banking facilities.
NTC’s 1H19 Financial Highlights (Source: Company Reports)
The company commenced its investments in 5G technology which was in line with the growth strategy to position itself for a “once in a decade” technology wave. The management team of the company is very experienced with their Fixed Wireless technologies and also excited by the opportunities the 5G technology brings to NetComm. The management plans to be early to market with a commercial fixed wireless 5G solution for use in large global markets.
What to Expect From NTC: NetComm expects the remainder of FY19 to be a year of consolidation to ensure a sustainable platform is in place to drive the next step change in growth. The Company reaffirms the FY19 guidance and the revenue is forecast to grow 15-20% while reported EBITDA to be in the range of $15 million to $18 million. The Company now expects earnings to be fairly balanced across the first and second half of FY19, based on expectations around customer order patterns.
Apart from the reported financial performance for the half year, the company also disclosed that Mr Ken Sheridan has stepped down from the position of the Managing Director & CEO, effective from the 22nd of February 2019. However, Mr. Sheridan will continue as the Executive Director on the Company’s Board. The Board will undertake a formal selection process as per the best governance practices, by which a new CEO will be identified for the organisation. Until the selection process is complete, Mr Steve Collins, the Company’s Chief Technology Officer has been appointed Interim CEO of the company.
Also, in a very significant development, the company has stated that the Casa Systems will acquire100% of the equity interests in NetComm by way of a scheme of arrangement (Scheme) that is subject to NetComm shareholder approval and court approval following the statutory and the regulatory requirements. As consideration, the shareholders will receive the cash consideration of A$1.10 per NetComm ordinary share (Scheme Consideration), and hence NetComm will become a wholly-owned subsidiary of Casa Systems.
Each of the NetComm’s Directors considers the Scheme to be in the best interests of NetComm’s shareholders and are unanimously recommending that NetComm's shareholders vote in favour of the Scheme.
Thus, it is very evident that the rise in the share prices of the company was only due to this definitive agreement with the Casa Systems and not on account of any significant financial performance as the EBITDA and NPAT both have fallen for the 1H 2019. Hence, it is advisable to the investors to keep track of the stock closely and we thus advice the shareholders might think of voting in favour of this resolution and the stated scheme of merger, to avail the benefit of the lucrative consideration being offered by the Casa Systems.
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.