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Q3 cash receipts up 218% on pcp, strong cost containment – Research as a Service (RaaS)

May 1, 2020

May 1, 2020

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Q3 cash receipts up 218% on pcp, strong cost containment – Research as a Service (RaaS)

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. The company has reported Q3 cash receipts of $2.1m, up 218% on the previous corresponding quarter with strong cost containment evident in this result.

The company noted that it had reduced staff costs by $0.645m or 39% from the prior period. Costs for the quarter were $2.9m, including manufacturing costs, well below our expectations. The strong cost containment suggests the company is tracking better than our forecasts for costs in 2H FY20. We are forecasting cash costs of $8.3m for 2H FY20, half of which is related to product manufacturing.

We have not changed our forecasts for this half given the uncertain environment presented by COVID-19 but see the cost containment delivered by the company in Q3 as a good buffer against any deterioration in market conditions. Our base case DCF valuation is $0.08/share fully diluted, implying a forward 12 months EV/Sales multiple of 6.65x.

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