Neratel takeover failure-blessing in disguise

July 9, 2012 at 2:21 pm Leave a comment

ST Engineering proposed takeover of Neratel failed, although the price dropped about 10% in response, ST Engineering takeover has revealed the value of this defensive stock.

As this stock is most likely to pay 3 to 4 cents yearly dividend barring unforseen circumstances, the yield of the stock is about 7.5% to 10% at a price of $0.40. (Note that it has yet to pay its dividend for 2011 which it should do soon). Although its business is highly competitive with a narrow moat, the company has impressed with good cash flow management and is debt free requiring minimal capex. Its recent foray into the MENA market for its telco products has started to reap dividends in terms of higher revenue and gross margins and lower operating costs (whether it is sustainable, we shall see).

Any company that wants to takeover this company now has to pay a higher price than the paltry 45 cents.

Disclaimer: I am vested in this stock.


Entry filed under: Investing.

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