Neratel

[KopiKat]

AS ORDINARY BUSINESS
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December
2012 together with the Auditors’ Report thereon. (Resolution 1)
2. To declare a final one-tier tax exempt dividend of 4 cents per share for the year ended 31 December 2012. (Resolution 2)

Does this mean they are going to announce another 4 cents on top of the 4 cents already announced?

It's the same 4ct.

[BlueKelah]

Thanks for info...

Very tempted to get in with this high dividend but I suspect market is still too high. However seems like BOJ is printing money so global trade may pickup and markets may remain bouyant for a while yet...

AS ORDINARY BUSINESS
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December
2012 together with the Auditors’ Report thereon. (Resolution 1)
2. To declare a final one-tier tax exempt dividend of 4 cents per share for the year ended 31 December 2012. (Resolution 2)

Does this mean they are going to announce another 4 cents on top of the 4 cents already announced?

It's the same 4ct.

[KopiKat]

Q113 Results : On a y-o-y basis, lower Revenue & Profit. Looks like 'honeymoon' years of growth from new territority (MENA) is over.

Financials
Presentations

A separate SGX Annc,

THE RESTRUCTURING OF NERA (MALAYSIA) SDN BHD BY NERA TELECOMMUNICATIONS LTD

For an aggregate considertion of RM500,000 (~S$201,000), rather significant impact on NTA & EPS! Using Q113 results as reference,

NTA : 19.54ct -> 21.48ct
EPS : 1.61ct -> 3.54ct

But, could be mainly due to this (from the notes),

The results include recognition of negative goodwill of S$6.61 million arising from the Restructuring on a pro-forma basis.

I wonder if it'll translate to bigger DPS...

[Wildreamz]

Q113 Results : On a y-o-y basis, lower Revenue & Profit. Looks like 'honeymoon' years of growth from new territority (MENA) is over.

Financials
Presentations

A separate SGX Annc,

THE RESTRUCTURING OF NERA (MALAYSIA) SDN BHD BY NERA TELECOMMUNICATIONS LTD

For an aggregate considertion of RM500,000 (~S$201,000), rather significant impact on NTA & EPS! Using Q113 results as reference,

NTA : 19.54ct -> 21.48ct
EPS : 1.61ct -> 3.54ct

But, could be mainly due to this (from the notes),

The results include recognition of negative goodwill of S$6.61 million arising from the Restructuring on a pro-forma basis.

I wonder if it'll translate to bigger DPS...

Looks like a strategically planned announcement (good news and bad news together). As long as the management remains prudent and the prospect in MENA remains good, Nera Tel is still a solid dividend company with much room for growth.

(vested)

[GreedandFear]

Yes, disappointing Q1 and Q4 2012 also didn't show q-on-q growth. Take always from yesterday's AGM (before Q1 announcement):

1. All the big equipment manufacturers use resellers. Hence Neratel's competitors are not the big boys but the resellers. Most resellers are small and, relatively speaking, Neratel has become a big player.

2. Company is very focused on localising operations as opposed to having Singapore based engineers flying around the region. To have critical mass in a country, you need min 15 engineers. Company does move its engineers around for projects (eg flying Indonesians to Myanmar).

3. Staff turn-over, amongst engineers, is about 20%. Hiring and retaining engineers is the bigger obstacle to growth.

4. Although many of the company's Singapore based engineers are not Singaporeans, their pay is higher than the Govt min for work passes so Neratel is unlikely to be impacted by new work pass measures (unless the ratio of Singaporeans to foreigners is changed).

5. Very focused on creating more stable recurrent revenue (currently around 45%) as opposed to opportunistically chasing contracts.

6. Surprisingly, their customer focus is blue chip (Singtel, M1, PLDT etc) which reduces credit risk. The Afghanistan business is all for a top Middle East telco - I forget the name).

7. Company has a relatively narrow focus and could move into other areas (a bit vague on what). Growth could be organic or given numerous smaller competitors, through acquisitions.

8. Strangely, the three departing directors were paid $300,000 total in ex gratia payments in recognition of their long time service to the company.

Given that one resolution was to allow the company to issue debt and shares and the point about fragmented competition, my view is that North Star's strategy will be to use Neratel to act as a consolidator within the industry through acquisitions as well as entering into new areas. The analogy used was Datacraft which grew into a $1.2b market cap company by the time it was sold.

I think North Star will push for major changes.

[KopiKat]

Yes, disappointing Q1 and Q4 2012 also didn't show q-on-q growth. Take always from yesterday's AGM (before Q1 announcement):

1. All the big equipment manufacturers use resellers. Hence Neratel's competitors are not the big boys but the resellers. Most resellers are small and, relatively speaking, Neratel has become a big player.

2. Company is very focused on localising operations as opposed to having Singapore based engineers flying around the region. To have critical mass in a country, you need min 15 engineers. Company does move its engineers around for projects (eg flying Indonesians to Myanmar).

3. Staff turn-over, amongst engineers, is about 20%. Hiring and retaining engineers is the bigger obstacle to growth.

4. Although many of the company's Singapore based engineers are not Singaporeans, their pay is higher than the Govt min for work passes so Neratel is unlikely to be impacted by new work pass measures (unless the ratio of Singaporeans to foreigners is changed).

5. Very focused on creating more stable recurrent revenue (currently around 45%) as opposed to opportunistically chasing contracts.

6. Surprisingly, their customer focus is blue chip (Singtel, M1, PLDT etc) which reduces credit risk. The Afghanistan business is all for a top Middle East telco - I forget the name).

7. Company has a relatively narrow focus and could move into other areas (a bit vague on what). Growth could be organic or given numerous smaller competitors, through acquisitions.

8. Strangely, the three departing directors were paid $300,000 total in ex gratia payments in recognition of their long time service to the company.

Given that one resolution was to allow the company to issue debt and shares and the point about fragmented competition, my view is that North Star's strategy will be to use Neratel to act as a consolidator within the industry through acquisitions as well as entering into new areas. The analogy used was Datacraft which grew into a $1.2b market cap company by the time it was sold.

I think North Star will push for major changes.

GreedandFear,

Thank you for the summary. Greatly appreciate it as I still don't have the time flexibility to attend AGMs.

On the latest Q1 results, if I were to look at it positively, EPS is still easily more than twice that of those years before they got MENA territority. Back then, shares price was aro' 40ct. So, why not more than twice that now with higher EPS??

I guess the key reason is DPS has stagnated at 4ct.

For now, I'm still positive that the new majority shareholder will be able to drive Neratel out of their slumbers of yester-years (flat Profit). Will put in cold-storage for the time being but will still follow quarterly results closely, in case I'm wrong.

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Looks like a strategically planned announcement (good news and bad news together). As long as the management remains prudent and the prospect in MENA remains good, Nera Tel is still a solid dividend company with much room for growth.

From my limited accounting knowledge, my understanding is that the 2nd announcement will result in a jump in Q2 EPS but this is a non-cash item (related to negative goodwill, whatever that is). The conversion of Neratel Malaysia from Associate to Subsidiary - I don't think the sustainable impact to EPS is significant, otherwise, the original shareholders wouldn't have agreed to sell at such prices. Sorry if I appears to be a wet blanket...

[KopiKat]

From Lim & Tan report today,

 Nera’s 1Q ’13 profit decline of 10% to $5.84mln was below expectations due to delay in sales of network equipment to the service provider market as well as microwave radio equipment in Asia and Middle East/North Africa.

 Looking ahead, the outlook has also moderated with 1Q ’13 Telecom business division orders having fallen 12.4% to $20.2mln due to delays in WIN tender awards and lower orders for satellite equipment. The Infocomm division orders is also flattish at $39.1mln due to competitive pressures while the network infrastructure market orders have declined 4.4% to $27.4mln due to weaker demand.

 The only bright spot was the point of sales payment solution division which posted 6% rise in orders to $12.2mln driven by continued strong demand for epayment solutions in Asia and a maiden contract win from a local bank in Myanmar.

 To capitalize on the strong performance in Malaysia, Nera has also paid S$201,000 for the other 70% stake that they do not own. The acquisition is earnings accretive as on a profoma basis, last year’s earnings would have been boosted from $19.4mln to $26.4mln, while 1Q ‘13’s earnings would be boosted from $5.8mln to $12.8mln.

 If sustained, this suggests that Nera’s next quarter’s earnings would be boosted significantly to close to the $13mln level, potentially boosting Nera’s annualized earnings to close to $50mln and putting the company’s PE at only 5x.

 This is undemanding relative to its historical average of 11x and coupled with its attractive yield of 6%, we maintain our BUY recommendation on Nera.

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They made some wrong assumptions on Nera Malaysia and the corrections in a later report,

 We apologize for our note this morning where we mistakenly assumed that the recurring earnings of Nera post the 70% acquisition of their Malaysian associate would be boosted to $12.8mln per quarter when in fact the profoma 1Q ‘13 earnings provided in the announcement includes a negative goodwill of $6.61mln.

 Thus the $6.61mln negative goodwill is only a once-off earnings boost and the actual recurring profit post the acquisition would actually be boosted by only 10% to $6.4mln.

 Notwithstanding our mistake, Nera is only paying a small amount of $200,000 to acquire the 70% stake that they do not own in their Malaysian associate company and translates to an acquisition PE of only 0.13x.

 Full year earnings would be boosted by about 10% to $24mln, giving a still undemanding PE of 10x and forward yield of 6%.

 We maintain BUY nonetheless.

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Extracts from OSK DMG report dated 30-Apr-13,


Nera Malaysia To Drive Up Earnings

NeraTel’s 1QFY13 results came in within expectation with SGD6.0m PATMI (-10.0% y-o-y) on the back of SGD36.5m revenue (-16.3% y-o-y). Notably, the group had fully acquired its associate Nera Malaysia. We adjusted our forecasts upwards to cater for the extra earnings contribution. Reiterate BUY with a higher TP of S$0.79 based on 9.8x FY14 P/E. The counter remains our top pick for the Tech sector.

Telco equipment and Network infrastructure segments declined. The 16.3% y-o-y fall in revenue is largely due to the 31.6% y-o-y decline in the Telecom segment from SGD19.3m to SGD13.2m as well as the 22.8% y-o-y decline in the Network Infrastructure segment from SGD18.4m to SGD14.2m. We believe that the decline is largely attributable to the difference in project timeline rather than the actual weakness of the business units.

Robust POS business to support earnings. Notably, NeraTel’s POS business registered a stellar growth of 55.2% y-o-y from SGD5.8m to SGD9.0m. As this business provides recurring revenue streams as well as yield better margins, NeraTel’s 1Q gross margins jumped by 6.1 ppts to 41.6%, lending supports to the bottom line. We remain upbeat on the growing potential of this highly profitable business, especially in Thailand and Indonesia.

Almost-free Nera Malaysia acquisition. Due to some legacy agreements, NeraTel managed to acquire the remaining 70% stakes of its associate – Nera Malaysia for a cash consideration of merely SGD0.2m, valuing the business at 0.2x FY12 P/E and 0.03x historical P/B. Nera Malaysia generated about SGD2.8m last year and had a net book value of SGD7.2m as of end 1Q13 (around SGD5.0m in cash), representing all accumulated profits that the business had earned over the years. Pending the auditor’s treatment of the book value for exceptional gains, we raise our earnings forecast by 7.3% and 9.0% for FY13 and FY14 respectively to account for the full contribution of Nera Malaysia.

[BlueKelah]

Kopikat : Given today price drop yield is fast approaching 7%
So long it maintain 4cent DPS can drink kopi for next 10 years I dun mind

This will be a nice one to add to my 'tech' stocks when it goes down hahaha...

[yawnyawn]

NERA TELECOMMUNICATIONS LTD PARTNERS WITH JUNIPER NETWORKS TO DELIVER SOFTWARE DEFINED NETWORKS (“SDN”)

Last line of the announcement..

In collaboration with Juniper Networks, Nera will deliver the benefits of JunosV Contrail family of products to its customers in Southeast Asia.

From what ive googled so far, SDN goes well with Data centres. With the increase in data centres in Singapore, i guess this bodes well for Neratel.

[Wildreamz]

News announcement like this makes me doubt if I knew the industry well enough to invest in the company. (vested)