NeraTel Completes Sale of Payment Solutions

NeraTel Payment Terminal

In my previous post, I mentioned NeraTel is selling its payment solution business (How Will Sale of NeraTel Payment Solution Business Impact Me). On 31st August 2016, NeraTel has officially announced it has completed the sale of its payment business to Ingenico Group.

The completion of sale announcement was made a month after NeraTel reported a 3.5% decline in gross profit from 15.9 million to 15.3 million YOY. The turnover for Payment Solutions business area has declined 52.1% ($6.5 million) YOY from $12.5 million to $6.0 million for the quarter and 44.3% ($10.3 million) YOY from $23.2 million to $12.9 million for 1H 2016. Read More

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.