How Will Sale of NeraTel Payment Solution Business Impact Me

Sale

We know that NeraTel main two businesses are telecommunications and info-communications. Under info-communications, it is further defined into network infrastructure and payment solutions.

On 20th May 2016, NeraTel announced that it has came into an agreement to sell its payment solution business to Igenico Group for S$88 million. The net proceed from the disposal of NeraTel payment solutions will be paid to shareholders.

My stock portfolio consist of 6% of NeraTel and I am pretty much concern about how the sale of its payment solution business will impact my holdings.

According to the announcement,

  1. NeraTel’s earning per share will fall from 3.7 cents to 2.9 cents after disposal of its payment solution business.
  2. Payment solutions business accounted for approximately 26% NeraTel’s total revenue of S$181.5 million and approximately 21% of its total earnings of S$13.4 million.

My personal analysis

  1. After disposal, NeraTel will be a pure Telecommunications play, focusing on network infrastructure. The entry of 4th Telco may be beneficial to NeraTel if NeraTel is engaged to provide networking services for the 4th Telco. However, this is purely my own speculation.
  2. NeraTel will be less capital intensive. However, it also means the loss of recurring revenue from the lease of Point of Sales (POS) systems.
  3. I expect a special dividend payout from NeraTel after the disposal.

My decision is to wait for further developments as my original purpose of purchasing NeraTel is for recurring dividend income. As payment solution only make up 26% of NeraTel’s total revenue, I am expecting not much of a dividend cut.

Why I did not subscribe to Manulife US REIT IPO

Manulife Logo

Manulife US REIT was recently listed on SGX on 20th May 2016. It is the first IPO in Singapore with United States office assets. The IPO was priced at US$0.83 per unit. I am not going to write about the financials of Manulife US REIT in this post as you can find the details in their investor reports. I will focus on the factors leading to my decision not to subscribe to this IPO.

Here are a few tempting factors for me to look into this REIT

  1. First kind of REIT to have assets in the United States. It is a pure play of United States office assets.
  2. Strong sponsor Manulife Real Estate with US$15 billion in real estate assets around the globe as of 31 December 2015.
  3. A form of asset diversification to My Sweet Retirement stock portfolio.
  4. Forecast attractive annualized yield of 6.6% (3.65 US cents).

We all know that IPO are usually priced higher and it is really uncertain whether the opening price on the first day of listing will end up higher or lower. I happen to know of another REIT with overseas assets which is IREIT Global.

IREIT Global which has assets in Germany was listed on SGX on 13th August 2014. IREIT Global offer price was S$0.88. If you look at the chart of IREIT Global, the price has fallen significantly since IPO.

IREIT Global Trend Graph

Readers of this post may have a different risk appetite. However, using IREIT Global as a comparison, I decided not to take the risk of subscribing to Manulife US REIT IPO. If price fall over the next few months, I may drill into this REIT further.

On Friday, 20th May 2016, Manulife US REIT opened on SGX at US$0.82 before falling as low as US$0.795.