NeraTel (N01)

Draft: 1/25/2017 (Market Cap: S$134m)

Updated: 1/28/2017


Based on 2015AR, and Q3/2016 Report.

Nera is in the business for 37 years, biz covers 17 countries.

Current chair(wo)man: Ms. Wong Su-Yen.
ex-CEO: Mr. Samuel Ang Seong Kang(resigned in Oct 2016, with company since 1996)

(including employer's CPF)

Director Fees

acting CEO: Mr. Beck Tong Hong

Total issued shares: 362m.

(of my interest is Northstar, who has a alliance with TPG capital)

Size of Shareholdings	No. of Shareholders	%	No. of Shares	%
1 – 99	5	0.1	35	0
100 – 1,000	184	3.83	173,951	0.05
1,001 – 10,000	2,617	54.43	16,232,716	4.49
10,001 – 1,000,000	1,982	41.22	101,866,959	28.15
1,000,001 AND ABOVE	20	0.42	243,623,339	67.31
TOTAL	4,808	100	361,897,000	100

Consists of:
Telecom biz segment(Wireless/WIN), Infocomm biz segment(NW infrastructure, Payment solutions)
Pdt: Evo series microwave radio
end-to-end electronic payment solutions




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Price History

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Business Review

NW infrastructure biz suffered a loss due to lower margin equipment sales and exchange loss in Nigeria project(1.2mSGD).
Sold POS business, and announced an interim dividend of $0.15/share.

Income stabilized, margin dropped in 2016 Q3.
Issue with Current Assets ($'000) in 2015:

Stocks	7,601
Contract work-in-progress	27,183
Trade receivables	72,578

Revenue: 181,513 (Telecom: 57,792/Infocom: 123,721)
Wages: 22,538

By segment:

	Telecom	%	Infocom	%
Turnover	57,792	32%	123,721	68%
Cost of sales	-33,037	57%	-88,958	72%
Gross profit	24,755	43%	34,763	28%
Distribution and selling expenses	-11,430	20%	-18,740	15%
Administrative expenses	-4,000	7%	-7,799	6%
Profit from operating activities	9,410	16%	8,098	7%
Segment assets	46,176	38%	76,309	62%
Segment liabilities	28,277	49%	28,940	51%
Capital expenditure	940	2%	3,895	3%
Depreciation and amortisation	788	1%	5,650	5%

By country:

Revenues	2015	2014
Singapore	53,956	55,810
Malaysia	36,378	32,241
Thailand	28,195	20,663
Indonesia	17,317	13,312
Philippines	13,261	21,964
Burkina Faso	8,711	–
Pakistan	5,675	5,589
Morocco	5,035	14,814
Afghanistan	4,456	8,352
Other Asian countries	4,415	6,170
Other Middle East countries	2,765	2,337
Others	1,349	1,147
	181,513	182,399

By sectors:

Customer Profile(by Sectors)	$’000	%
Telecommunications	51,720	71%
Financial institutions	7,033	10%
Government agencies	7,195	10%
Multi industry conglomerates	2,556	4%
Media and broadcasting	1,630	2%
Others	2,444	3%
	72,578	100%

One major customer income $20m(is that Singtel/Optus group)?
35% TR from 3 telecom providers.

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What analysts say

target price before special dividend.

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My assessment
NeraTel faces fierce competition in Telecom, Infocom infrastructure business, its growing story is lacking, leading to rather price book comparison.
Estimated valuation: S$140m.
鸡年的鸡肋。

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Questions remained:
1. What is the reason company incurred Nigeria project FX loss of 1.2mSGD when it claims using forward currency contract hedging the exposure for any contract >100k. (Pg 105)

(Approximately 19% (2014: 34%) of the Group’s sales and 66% (2014: 73%) of the Group’s purchases are denominated in foreign currencies)

2.Gearing ratio(Pg 115)
My usual understanding of Gearing ratio, or at least what I understood in China, is debt-to-equity ratio (total debt / total equity). I do not understand why on Pg 115 of AR, it is defined as net debt divided by total capital plus net debt. And net debt is counted as loans and borrowings and obligations under finance leases, less cash and cash equivalents. So it is gearing ratio is NIL(since no Net Debt by its definition), but how about its long term debt/liabilities, when the denominator is equity(both short & long term), how can numerator just counts short term ones?
 

	$’000
Cash and cash equivalents (Note 27)	20,770
Deposits pledged (Note 27)	250
Less: Borrowings (Note 15)	-16,311
Net cash and cash equivalents	4,709
Capital:
Equity attributable to equity holders of the Company	56,026
Capital and net debt	56,026
Gearing ratio	–