5GN gets ahead of the game in the booming data centre market with key strategic acquisition

Special Report: 5GN is taking a disciplined approach to new acquisitions as it builds out a key strategic footprint in the Australian market.

At the turn of a new decade in the digital age, the need for high-speed internet, good data storage and cloud computing services is more important than ever.

In fact, current demand is in excess of existing supply – which also presents a market opportunity for companies with the skills and expertise to fill the gap.

ASX-listed 5G Networks (ASX:5GN) is one company capitalising on that unmet demand, with a stable of data centres providing mission-critical services to a growing base of Australian business customers.

The company comes into 2020 with strong momentum, having booked record operating cashflows in the December quarter.

And this morning, 5GN announced another key strategic acquisition with the purchase of a privately-owned data centre in North Sydney.

Located in St Leonards, the new centre will add to the company’s existing high-speed data network serving key markets across Sydney, Melbourne and Adelaide.

“We are pleased to be expanding our footprint as we look towards realising significant growth opportunities by capitalising on the rising appetite for reliable and secure high speed data services in Australia,” 5GN managing director Joe Demase told Stockhead.

“Our strategic approach has been one of building these data centres in high growth metropolitan areas where our customers are. We did this previously with both acquisitions in Melbourne and Sydney CBDs, leveraging the highest standards of security and access control.”

“We see North Sydney as the logical progression of our strategy for giving our clients access to the best-in-breed secure and high speed data connectivity services.”

Geographically, the North Sydney area is experiencing rapid growth as a tech corridor, which makes it an important strategic addition to 5GN’s market footprint.

The company said North Sydney accommodates “many of the top-tier digital providers in Australia”. And in turn, the centre’s location allows for “easy access for IT staff to save valuable travel time to manage their critical infrastructure”.

To acquire St Leonards, 5GN paid a total cash consideration of $2m, financed from current operating cashflow and existing cash reserves.

The value is equivalent to around three times current core earnings of $750k, and 5GN expects to outlay around $500k to bring the centre to full operating capacity.

Currently, annual revenues of $1.3m are derived from existing operational capacity of just 32 per cent, allowing for plenty of upside when combined with 5GN’s existing network and intellectual property.

The new centre houses another 120 data racks, bringing the company’s national footprint to 720 racks – all connected to a 10-gigabit high-speed network with market-leading levels of security and reliability.

And it forms part of a disciplined approach to growth by acquisition by 5GN’s management team, with a focus on underutilised centres in key strategic locations.

Ultimately, it comes down to effective execution on a huge market opportunity, characterised by the “growing requirement for digital infrastructure to support the explosive adoption of cloud services”, 5GN said.

This story was developed in collaboration with 5G Networks, a Stockhead advertiser at the time of publishing. This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.