The capital raise question is a good one. The big question is, why would they need to do one this financial year?
In one of their recent updates, they claimed... "Consolidated EBITDA breakeven exit run rate was achieved in June 2023 on a normalised basis excluding R&D. " which stacks up with related trends.
Now, of course, that is good, especially as their 4C's show a trend toward Operating Cash break-even. This should be helped by the Cloud Gaming segment as its paid tiers become the norm and their on-net capacity grows.
But of course, Pentanet is a telco with its own infrastructure... and that means CAPEX in one form or another.
Traditionally, Pentanet has had no or little debt. This has recently started to shift with a $5M Westpac facility to acquire Gen3 Servers. This is half-drawn and should cover major capex in Gaming. In addition, their strategy clearly states they plan to utilise the $5.95m Cambium ‘Network-as-a-Service’ (NaaS) vendor financing for 5G rollout, which spreads costs over 4 years as I understand it.
They, of course, also need to make the final $4M payment for 5G spectrum over the next 2 years. So there is that.
Given their Cash Balance of $9.9M at the end of FY23, things look pretty reasonable. Their use of specialised funding/Models for specific assets (Gen3 and 5G) highlights, in my mind, a careful approach and one that is reluctant to dilute without good reason. This will be helped significantly if they continue to demonstrate the trend toward positive operating cash. On balance, unless a new opportunity presents I can't see them rattling the tin in FY24, and frankly I would be surprised if they did in FY25.
Interesting times.
5GG Price at posting:
4.7¢ Sentiment: Hold Disclosure: Held
