Is High-Yielding Nera Telecommunications Limited A Value Share?

You could be hard pushed to find someone who considers the manufacturing of communications equipment as one of the most glamourous of industries.

But let us not forget that without the producers of LANs, WANs, routers, telephones, switchboards and exchanges, many of us might struggle to go about our daily lives.

In the South East Asian region there are 23 companies that make telecom equipment. Singapore is home to eight of the largest players and accounts for around 90% of the total market capitalisation. Singapore is unquestionably the SE Asian hub for telecom equipment producers.

Nera Telecommunications Limited (SGX: N01) with a market capitalisation of around S$285 million accounts for over half the market in the SE Asia. Investors in the market leader are rewarded with a dividend yield of nearly 8%. The company that works in the area of satellite communications and transmission products & systems, is however not really a value stock. With an earnings multiple of over 20, which is some way above the market average of 14, and a price to book of close to five, it is easy to see why

Hengxin Technology Limited (SGX: I85) is a leading manufacturer of coaxial cable series for mobile telecommunications in China. It trades at six times earnings, which is less than half the market average. It is also valued at a significant 60% discount to its book value. On those measures, Hengxin looks better value.

Investors should be wary, however, of the company’s net debt, which at S$40m is fairly substantial. Its market value is only S$80m. Perhaps as a consequence of the significant debts and also little in the way of earnings growth investors are only offered a dividend yield of 2%.

Aztech Group Limited (SGX: 560) a company that prides itself on its superb R&D facilities and engineering expertise and an ability to launch revolutionary products and services. Its dividend yield of 5.7% isn’t quite on a par with that of Nera but is good nonetheless. Boasting cash on its book, a price to earnings ratio of 10 and trading at a 30% discount to book, Aztech might just be worth a closer look.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Adam Kuo doesn’t own shares in any companies mentioned.