NERATELECOMMUNICATIONS LTD
N01.SI
Neratel - Challenges Lie Ahead This Year
- We expect this year to be a trying one for Neratel, against the backdrop of a challenging macro environment. It recorded a disappointing performance last year, with decreasing orders for its info communications unit being partly due to a delay from a customer.
- DPS dropped to 3.5 cents despite an increase in bank borrowings. As such, we cut our NPAT estimate for this year by 13% to reflect the weaker outlook.
- Maintain NEUTRAL, with a DCF-backed TP of SGD0.55 (4% downside) implying 14.3x FY16F P/E.
Telecoms segment remains healthy.
- Neratel’s order intake increased 7.9% to SGD76.6m in FY15, mainly due to higher microwave radio equipment orders from mobile operators in the Middle East and Africa market.
- Management expects clients to continue investing in the expansion of their wireless infrastructure networks to provide higher capacity and better coverage.
An approved vendor in Singapore that does in-building coverage.
- Starting from 4Q, Neratel will be invited by all three major operators locally for the rollout of in-building projects.
- According to management, there are only 3-4 approved vendors currently in the local market.
Competition remains high in payment solutions.
- Neratel secured approximately similar levels of order intake for its payment solutions business.
- Going forward, it expects competition to remain intense and fragmented, with many local players representing various brands.
Key risk:
- An economic recession.
Maintain NEUTRAL.
- We lower our NPAT forecast for this year by 13% to reflect the weaker outlook.
- Backed by a reasonable FY16F dividend yield of 6.5%, we remain NEUTRAL on Neratel with a DCF-backed TP of SGD0.55, implying 14.3x FY16F P/E.
Jarick Seet
RHB Research
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http://www.rhbinvest.com.sg/
2016-02-29
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SGX Stock
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