Tuesday, September 24, 2013
Neratel: CIMB has unrated report. House note that NeraTel is poised to benefit from the increased demand for networking equipment given its regional presence and extensive product offerings. Its attractive dividend yields and net cash pile point to limited share price downside. That said, the market may have priced in all the recent good news on NeraTel. Using a dividend discount model, house estimate that NeraTel could be worth $0.74 (constant dividends of $0.04 and cost of equity of 5.4%). Expect DPS of 6c for FY13 and 4c for FY14-15, translating into yields of about 8% and 5.5%, respectively. Free cash flows are expected to remain strong despite additional capex for POS terminals to be leased by customers. NeraTel remains in a strong net cash position, enabling it to invest in growth opportunities and ensuring future interim and final dividend payouts to shareholders.