Neratel

[ngcheeki]

L&T report on Nera Tel this morning, 16 July 2012:

Nera’s 2Q ’12 profit rose 33% to $3.34mln, bringing
1H ’12 profit up 105% to $9.84mln, underpinned by
45% rise in the Telecommunication division as new
markets in the Middle East and North Africa made
robust contributions (tripling to $6mln) while sales
in the Infocomm division rose 9.3% as consumers
turn to cash-less payment systems resulting in higher
point of sales terminals sold.
 Working capital management remains robust with
$7.6mln worth of free cash flow generated for
1H2012, bringing net cash holdings up from
$46.5mln to $54.3mln, representing 36.5% of its
current market cap.
 As the company did not pay their usual final dividend
last year due to the then pending takeover offer from
ST Engineering, the company has made up for it by
declaring its first ever interim dividend of 4 cents a
share, giving an attractive yield of 9.8%.
 Looking ahead, prospects seems reasonably bright
despite the uncertain global macro environment due
to their new entry into the Middle East and North
Africa, allowing them to increase their order books from
the Telecom division by 78.4% in 1H 2012 to $38.9mln,
while the continued demand for cash-less payment
systems have seen their Infocomm division’s order
books grow by 8% to $60.9mln.
 We believe the 4 cents a year dividend is sustainable
going forward, giving an attractive yield of 9.8%. This
should provide good support for the stock.
 Our only concern is that the 44.5-45 cents level
represents formidable resistance, being the level that
the stock has been stuck at since the beginning of this
year as investors supported the stock at that level in
anticipation of the successful takeover bid by ST
Engineering.
 We are happy to continue to HOLD on to the stock
for the attractive yield

Not vested.