NeraTel has been trading below 0.65 for about 2 months since yesterday. Finally manage to break out today and staying above currently as of now. Next Critical resistance is at 0.700… likely to test this level within the coming days. Possible to average up on this break of 0.700 and can see it find a new high. As long as 0.65 holds as new support, still positive on this counter. Quite a clear breakout as seen after testing 0.65 for about 4 times for the past 2 months. A break above 0.700 can pave the way to 0.74 to 0.75 near term.
Stop loss 0.635
DMG – 1 JULY 2013
Nera Telecommunications: S$0.63
BUY (TP: S$0.79)
Myanmar Telco’s Real Singapore Beneficiary
Myanmar government announced the winners for the two coveted licenses to
Norway’s Telenor and Ooredoo (formerly Qatar Telecom), which beat out
SGX-listed Singtel and Yoma. In view of the fact that both victors are
NeraTel’s established customers, we expect the latter to emerge as the sole
Singapore winner in the Myanmar telco battle. Reiterate BUY with an
unchanged TP of SGD0.79 as we look forward to a strong year ahead.
The only Singapore winner in Myanmar’s telco battle? While
SingTel and
Yoma have lost the battle for Myanmar’s telco licences, NeraTel may score
an indirect victory. This is because our checks show that both of the
Myanmar license winners - Telenor and Ooredoo - are NeraTel’s existing
customers. NeraTel is currently providing services to them in Indonesia and
in Malaysia. According to the terms in the contract, effective from
September 2013, both Telenor and Ooredoo have nine months to commence
operations, and need to cover 75% of Myanmar with voice services and 50%
with data services within the next five years. In order to maximise the
15-year license benefits, Ooredoo has even outlined a more aggressive plan,
spending USD15bn to reach 90% of Myanmar’s population within two years.
In order to cover such a vast area in a short time frame, we expect these
telco operators to soon open up project tenders to equipment and system
integrating vendors as well as to use radio transmission technology in the
process. Given NeraTel’s established track record and expertise in the
field, we believe that the group has a high chance of winning the tenders.
The group has already been deploying payment terminals in the country and
we expect them to formally set up a telco company in bidding for the
contracts.
Another pleasant surprise coming up? As mentioned in our
previous report
dated 29th April, the recent Nera Malaysia acquisition will result in
one-off profits of around SGD7m, of which SGD5m is in cash. We believe that
there is a high chance that the gain will be recorded in the upcoming 2Q
results, thereby increasing the likelihood for the company to surprise the
market with interim dividends. As such, we adjust our FY13 profit estimates
upwards.
