As expected, Neratel delivered a strong set of Q2 results, mainly due to the negative goodwill arising from the acquisition of the remaining 70% equity interest in associate.
On the operating segment, the “Telecommunication” business delivered strong results with a 75.5% increase yoy in the turnover due to higher sales of the microwave radio equipment in the Wireless infrastructure network in the MENA (Middle East and North Africa) market. The “Infocom” segment disappointed in the quarter due to lower sales in its network infrastructure and Payment Solutions (POS). The overall operating business segment remains stable year on year and I just had a feeling that they have yet to deliver the growth investors are expecting in Neratel.
Management has indicated that the outlook remains stable but with keen competition along its main core business. OSK has published a report earlier stating that the management has expected the group to increase its profits by 3-fold within the next couple of years. The expectations for Neratel are certainly going to be up there with a new management in charge and they will need to deliver especially given the strong run-up in its share price in recent months.
Neratel has issued a 2 cents/share dividend for the year ended 30 Jun 2013 and will certainly provide the support it needed in the next couple of weeks. Strong balance sheet, strong cash flow and a good management. But the question remains on whether the company can evolve to make a breakthrough in its core business.