Friday, March 20, 2015

Would I Buy Neratel?

I know Neratel is a long time darling stock of dividend investors. And for good reason too. Not only does it pay a pretty high dividend, it has been appreciating in capital value as well. All the hallmarks of a happy ending to an investment.

Neratel is at 52 week lows, with it's yesterday's closing price at $0.675. Oh how the mighty has fallen from a high of $0.815. That's a 18% fall from it's peak. 2% away from going into a bear market, haha.

Now, with prices cheaper compared to before, is Neratel a good buy?

P/NAV is not useful since this a service company, so meh. My favourite metric gone. D/E ratio is 1.3 which I am not very fond of, however payables do make up 62% or 85% of debt, depending if you want to count non-trade payables. Cash seems at a healthy level, not too much, not too little.

Gross margins seems good at 33% and net margins come in at 9%. Is that normal for their industry? I have no idea. Operating cashflow is positive, but overall change in cash is negative. That's something I don't usually like.

EV/EBITDA comes in at 12 while P/E is 15. Value stock? No way.

Is this a decent stock? Yes, it does seem like it. If we weren't so long into a bull market, I wouldn't mind accumulating this stock at pullbacks. However, does this fit my traditional criteria of shopping for value? Nope.

I see owning this stock at these valuations as simply having a preference to have returns in the form of dividends paid out, rather than capital appreciation. If prices fell far enough, I think that one day in the future I might be able to look at Neratel as a stock that can deliver both dividends and capital appreciation.

As good as this company is, I would not buy this stock at this price.

Am I greedy? Most definitely.


  1. Yea don't think I will buy at this moment too

    1. Hehe, we can wait together then! Any price or valuation targets you are waiting out for Jimmy?

  2. Replies
    1. Alamak, $0.67, I think Neratel don't want you, haha!

  3. Hi GMGH

    Very good observation and analysis on the company and one of the much better ones I've seen around.

    1. Hey B,

      I've only got good observation, but you had a good play! Very very nice taking profit at $0.76 before the waterfall decline!

  4. Do you think the latest dividend cut by Neratel in Q4 2015 is a sign of things to come ?

    1. Hi betta man, tbh I'm not really taking any actions. The markets seem very directionless and I don't feel like I have enough information to do anything yet. I will continue to wait, and I might add more in the future.


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