Neratel - RHB Invest 2016-05-10: 1Q16 Results Flash Note

NERATELECOMMUNICATIONS LTD N01.SI

Neratel -1Q16 Results Flash Note

1Q16 NPAT dropped 33.4% YoY, mainly due to sales declines in both Network Infrastructure and Payment Solutions business segments.
Both top-line and profitability were also impacted by delays in a significant order from a customer and also a pull back in project implementation due to slow payment by a customer. However, all this will likely be completed and recorded in Nera's 2Q16 numbers.

Gross profit margin improved slightly from 33.5% to 34.1% YoY mainly due to lower proportion of equipment sales.
Telecom segment: Revenue up 45.7% YoY due to increased revenue from SEA & other regions including Middle East and Africa.
Network Infrastructure segment: Revenue down 19.5% YoY due to lower sales of network equipment to the Service Provider market. There was a delay in a significant order from a customer and also a pull back in project implementation due to slow payment by a customer.
Payment solutions segment: Revenue down 35.1% YoY due to lower sale of point-of-sale terminals in Thailand.

We remain Neutral on Neratel with a DCF-backed TP of SGD0.55 and make no changes to our earnings estimates.
Management remains convicted of an improvement in the subsequent quarters and cited that the weaker set of 1Q16 results is mainly due to delays in a significant order from a customer as well as a pull back in project implementation due to slow payment by a customer.
In addition, they are also in talks to sell its payment solutions business which could be a positive share price catalyst in the near-term.

Jarick Seet RHB Research | http://www.rhbinvest.com.sg/ 2016-05-10

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