Neratel

Neratel: DMG re-initiate coverage with a Buy rating and TP of $0.64. NeraTel, apremier network equipment system integrator which was the subject of atakeover bid by ST Electronics, is known to be a high yielding but lowgrowth stock. But things are set to be a lot more exciting with 1) The gamechanging NERA/OEM agreement, 2) flourishing development of the POS terminalbusiness in SEA and 3) 14x mobile data demand from CSPs. House reinitiatecoverage with a TP of S$0.64 based on its 5-yr historical average of 9.8xP/E and supported by a conservative DCF valuation of $0.65 (WACC: 12% andgrowth: 0%).Expecting record profits. House expecting NeraTel to deliver recordprofitability starting from this year, backed by improved margins andgrowth catalyst In 1HFY12 alone, it secured new orders worth $99.8m(+27.6% YoY), or 54.0% of FY12 forecasts. Earning visibility has improvedfrom 6-9 month to 12 months and FY12 profits are estimated to jump 40% YoYto $19.0m.