NERATELECOMMUNICATIONS LTD
N01.SI
NeraTel - Take Profit On Special Dividend
- As expected, Neratel announced a special dividend of SGD0.15, representing a 20% yield due to the sale of its POS business. However, its network infrastructure business suffered a shock loss mainly due to higher equipment sales mix with lower margins, as well as loss from the Nigeria project due to the devaluation of the Nigerian currency.
- We think that current price levels are optimal for profit taking due to the challenging environment its remaining business will face.
- We change our call to Take Profit from Trading BUY with a slightly lower TP of SGD0.77.
SGD0.15/share interim dividend declared.
- The company has announced an interim dividend of SGD0.15/share sale agreement of POS, representing a yield of 20% for FY16F.
- We do expect an additional dividend of SGD0.01 to be paid out at the end of FY16F if its 4Q16 is profitable.
Hit by Nigerian business and higher equipment sales mix.
- Its network infrastructure business suffered a shock loss mainly due to higher equipment sales mix with lower margins, as well as loss from the Nigeria project due to the devaluation of the Nigerian currency which caused a SGD1.2m FX loss.
A challenging outlook ahead.
- Declining margins from equipment sales as well as tight competition will pose a great challenge to Neratel going forward. On the bright side, order intake for the Infocomm segment increased YoY by 38.2% to SGD84.6m 3Q16. The group is likely still going to expand in Indonesia as it sees them as a key market for Neratel going forward.
- Key Risks : Stiff competition leads to declining margins.
Downgrade to “Take Profit”.
- We think that current price levels are optimal for profit taking due to the challenging environment its remaining business will face.
- We change our call to Take Profit from Trading BUY with a slightly lower TP of SGD0.77.
Jarick Seet
RHB Invest
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http://www.rhbinvest.com.sg/
2016-11-10
RHB Invest
SGX Stock
Analyst Report
0.77
Down
0.800
