After announcing the backing of a $161 million takeover bid by NASDAQ listed Casa Systems, Netcomm Wireless Ltd [ASX:NTC] shares are trading a staggering 49.30% higher, to $1.06 a piece.
The timing couldn’t have been better for shareholders as NTC’s share price has been trading sideways recently, performing poorly as it lost almost half its value in the last year.
While a surge such as this is a good thing, it is natural that big announcements such as NCT’s that makes a stock price sensitive to shifts.
Ideally, shareholders want a stock with the best chance of rising gradually over time…
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How Netcomm’s takeover fairs for shareholders
NASDAQ listed Casa Systems will be paying $1.10 a piece for the ownership of Netcomm. NTC’s board has given its full support, but is still waiting on shareholder’s approval and the Australian Foreign Investment Review Board’s (FIRB) go ahead.
The news comes as a bit of a hit and miss. On one hand, Casa’s offering price is higher than its current level, but on the other; Netcomm’s net value is potentially worth more than what Casa is paying for the company.
NTC recorded a 6.5% increase in revenue to 94.3 million, while EBITDA (earnings before interest, tax, depreciation and amortization) was down 9.6% to $8.3 million. Leaving 2019 financial year with a guidance between $15-18 million.
The reduction was propelled by planned 5G investments — a strategic move by NTC to ramp-up the next step for growth in the 2020 financial year.
Additionally, the rollout of telco infrastructure equipment contracts is supporting growth.
The figures reflect changes that NTC has experienced with a larger amount of lower margin NCD sales.
But FY19 is expected to be evenly balanced across the second half, according to its results release today.
Netcomm share price 2019 outlook
There’s still plenty of positive thigns to come for Netcomm.
As stated in their announcement today, revenue is expected to climb by 15–20% over this year, with likely reported EBITDA between $15–18 million.
Events such as a takeover or the release of new half year results can often cause massive spikes in share price. What investors should look for is whether this increase is sustainable, and if future growth will occur in Netcomm’s share price.
For Money Morning
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