S$0.385-NERA.SI
2Q ’11 performance came in slightly weaker than expected with profit declining yoy by 16% to $2.5mln, pulling 1H ’11 profit down 7.2% yoy to $4.8mln.
2Q ‘11 sales fell 6% yoy to $35.8mln due to weaker performance of the telecom business as service providers become more conservative about their capex outlook. This coupled with the higher cost base resulted in the lower profit performance.
While performance is expected to remain lackluster for the telecom segment given 1H 2011’s order book has declined 30% versus last year (to $22mln), the group’s performance is expected to be underpinned by a 22% rise in the infocomm’s order books to $56mln, resulting in a flattish order book for 1H 2011 at around $78mln.
The increased requirements for internet speed upgrades as well as point of sale terminals is driving the infocomm divisions’ growth.
The compensating factor for the flattish slowdown is the company’s consistent dividend payment. The company has been paying consistent dividends of at least 3 cents a share in the last few years with 4 cents paid out last year.
Besides its stable profit base of $10-11mln in the last few years, its solid cash generation has also been clearly demonstrated in the latest results release with 2Q ’11 operating cash flow of $7.1mln, increasing 1H2011 operating cash flow to $18.7mln, more than sufficient to fund its capex of $2.1mln and dividend payment of $14.5mln, and still increasing its cash holding by $2.1mln to $42.1mln. This represents 30% of its current market cap.
Since our last HOLD recommendation, the stock has basically flat-lined and we see no reason to change our recommendation pending an update from management later today.
No comments:
Post a Comment