DXN Ltd Fully Underwritten Entitlements Offer to Acquire Hobart DC

DXN Ltd (ASX:DXN) is a vertically integrated prefabricated modular data centre business with manufacturing facilities in Perth and its own data centre, SYD01, at Sydney Olympic Park in Sydney.  In response to the recent market volatility, DXN has restruck its non-renounceable entitlement offer. The company is now offering a 13 for 10 non-renounceable share issue at $0.01/share to raise $5.92m, with an attached $0.02/share option expiring in three years’ time. Proceeds from the offer will fund the acquisition of TasmaNet’s Data Centre 3 revenues and assets ($2.43m), $0.89m in general working capital, $2.0m for product manufacturing working capital for DXN Modules and $0.09m for data centre marketing. The offer is fully underwritten by lead manager Pinnacle Corporate Finance with institutional shareholder SG Hiscock sub-underwriting approximately $556,000 and DXN executives $95,000 of the offer. The company has also secured a six-month principal and interest repayment holiday from its $5m secured chattel finance facility with ANZ Bank, saving around $140,000 per month. The financing restructure follows the announcement last week of a two-phased $2.3m contract with Speedcast International (ASX:SDA) to design, build and install a prefabricated modular cable station at its Mozambique operations. This underscores our forecasts for sales of $7.8m (total revenues of $8.8m) in FY20.  We have updated our DCF valuation for the new entitlement offer, which will see more shares and listed options issued than previously forecast. Our base case DCF valuation is $0.08/share fully diluted, implying a forward 12 months EV/Sales multiple of 6.9x.