Wednesday, August 7, 2013

NeraTel

NeraTel: 2Q13 earnings increased 213.4% y/y to $10.5m, mainly due to a $7.1m gain after acquiring the remaining 70% equity interest in an associate at a discount on the fair value of net assets. Otherwise, 2Q earnings were almost flat at 1% y/y of $3.4m and 1H13 earnings of $9.3m (-0.5%). 2Q13 revenue rose 13.1% to $47.2m due to an impressive gain of 75.5% to $19.3m in its telecom segment coming from higher sales of microwave radio equipment in the wireless infrastructure network business in Middle East and North Africa. This was partially mitigated by a dip of 9.1% in its infocomm segment to $27.9m after achieving lower sales of network equipment to service providers due to a delay in projects and lesser delivery of point-of-sale terminals for the quarter. 1H13 revenue fell 7.1% to $51.1m y/y. Gross profit margin for the quarter improved slightly to 30.8% from 29% and 35.5% from 32.3% for 1H13. This was attributed to a higher sales mix in products, projects and services for both segments, as well as higher profit margin upon completion of certain projects. Despite keen competition, demand for wireless infrastructure networks from mobile operators continue to be driven by the growth in mobile users, broadband services and compliances to stringent regulatory service standards. Separately, another key growth area will come from its network infrastructure segment which will be driven by increasing smart devices, internet, web services and regulatory compliances where services providers will continue to build, expand and upgrade their networks. Enterprise and public spending will also grow towards upgrading IT network infrastructure to achieve higher productivity, service and security. The interim dividend halved to 2 cents. NeraTel currently trades at 11.5x forward P/E and 4.3x P/B.

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