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,
- NeraTel’s earning per share will fall from 3.7 cents to 2.9 cents after disposal of its payment solution business.
- 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
- 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.
- NeraTel will be less capital intensive. However, it also means the loss of recurring revenue from the lease of Point of Sales (POS) systems.
- 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.
Hello
I actually think that the dividends will be cut quite a bit in the future as this is an important segment of the business which will stir the company into different direction.
Just wondering on what circumstances will make you come to a decision whether to hold or sell?
Hi B, the payment solution only makes up 26% of neratel revenue. After the disposal, it will be paid as form of special dividends to shareholders. I decided to hold for the time being in wait of further developments. Shall see if the remaining telecommunications segment can substain.