Singapore’s Big Loser for the Week: Nera Telecommunications Ltd

Nera Telecommunications Ltd (SGX: N01) has fallen by around 3% since last Friday to close at S$0.65 this week.

Over the same period, the Straits Times Index (SGX: ^STI) had moved in the opposite direction as it gained 1.1% to 3,450 points. This makes Neratel a big loser in the local share market.

Many may not know about it, but the company is behind the machines that are used when our credits cards are swiped to make purchases (these are known as point of sales systems).

The firm also offers other products and services ranging from “satellite communications, microwave radio transmission, to information technology, networking infrastructure and high-end electronics contract manufacturing.”

On Tuesday this week, Nera Telecommunications announced that it had set up an indirect wholly-owned subsidiary, Nera Payment Solutions (M) Sdn. Bhd., in Malaysia. Its main activities include sales, leasing, maintenance, and repair of payments systems.

Nera Telecommunications’ latest move in Malaysia seems opportunistic. In a recent news report, it was stated that the country is looking to move more toward cashless payments.

Currently, around 90% of transactions there are still done in cash whereas most developed countries actually perform the bulk of their transactions using plastic. Malaysia’s central bank, Bank Negara, said that by 2020, the number of card terminals will need to be increased from the current 220,000 to 800,000. This can be a strong tailwind for Nera Telecommunications’ business in Malaysia.

This also fits the narrative given by the company in its earnings release for the year ended 31 December 2014:

“The Group believes that the growth in the payment solutions business will be driven by the increase in plastic cards, various types of transactions, credit and debit cards spending and government initiatives to go cashless, banks outsourcing their point-of-sale infrastructure as well as increased regulatory and industry compliance requirements.”

The telecommunications outfit is trading at 15 times its historical earnings and sports a dividend yield of 6.2% currently.

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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 Sudhan P doesn’t own shares in any companies mentioned.