ASX:5GG
Pentanet Ltd
Investment Summary
The fund managers believe that Pentanet Ltd (5GG) is on a positive trajectory, supported by key developments in its partnership with NVIDIA. In their opinion, the recent extension of the GeForce NOW Alliance Partner Agreement and the inclusion into the NVIDIA Graphics Delivery Network (GDN) signify growth opportunities. This reinforces the company's strong membership base of over 530,000 and its ability to cover fixed costs, providing a solid foundation for future profitability. 5GG generated its maiden positive quarterly EBITDA of $0.6m, reflecting disciplined financial management, and a steady 7% revenue growth reaching $5.7m. Notably, 5G subscribers rose 17% QoQ, and gaming revenue saw a 27% QoQ increase. The fund managers are optimistic about the company's potential, especially as it prepares to double its 5G network coverage in FY25. They emphasize, however, that the market will seek clearer financial evidence before significantly re-rating the stock.
Commentary From The Managers
Saville Capital
31 Jan 2025
$0.05
- 5GG generated its maiden positive quarterly EBITDA of $0.6m, showing a $1m improvement on 1Q.
- Cost-reduction initiatives and disciplined financial management contributed significantly to the EBITDA increase.
- Steady revenue growth of +7% on pcp, totaling $5.7m.
- Gross profit increased +6% on pcp (and +17% QoQ) to $2.8m.
- 5G subscribers rose +17% QoQ, with plans to double network coverage in FY25.
- Gaming revenue growth was up +27% QoQ, driven by a 23% increase in Cloud Gaming ARPU due to new pricing plans.
- Net operating cash flow improved to $0.9m in 2Q FY25, up from -$0.6m in 1Q.
- With over $2m in cash and ~$7m in unused debt facilities, 5GG is managing cash flow tightly.
- Saville Capital believes the Company is proving its ability to operate a profitable business model, expected to improve as revenue scales.
Saville Capital
31 Mar 2024
$0.07
- Saville Capital notes that 5GG had a busy month with significant announcements regarding its partnership with NVIDIA.
- 5GG signed an extension to its existing GeForce NOW (GFN) Alliance Partner Agreement.
- New Zealand has been added as a serviceable territory, with potential expansion to Indonesia.
- The agreement allows 5GG to exclusively sell its cloud gaming services, which currently boasts over 530,000 members.
- 5GG has achieved a sufficient base of paid memberships to cover its fixed monthly operating costs.
- 5GG's inclusion in the NVIDIA Graphics Delivery Network (GDN) enhances its capabilities beyond cloud gaming.
- The GDN enables businesses to create interactive experiences using NVIDIA’s global streaming infrastructure.
- This new capability opens up additional industrial and commercial opportunities for 5GG.
- 5GG undertook a capital raising of ~$4m to fund new NVIDIA cloud servers and infrastructure.
- Saville Capital sees potential for significant earnings growth through its relationship with NVIDIA.
- However, further financial details and tangible evidence are needed for a more sustained re-rating of the stock.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.