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7 Quick Things I Learned From NeraTel’s AGM 2015

7 Quick Things I Learned From NeraTel

Payment solutions is a growing business segment for NeraTel. The segment generates consistent, recurrent income and could see it become the company’s “crown jewel” in the near future.

One worry among investors though is the introduction of Apple Pay and how it may affect NeraTel’s payment solutions business in the near future. With that in mind, I decided to attend NeraTel’s AGM this year to find out more about this possible disruption and whether it could hurt their payment solutions business.

So here are…

7 Quick Things I Learned From NeraTel’s AGM 2015:

  1. The payment solutions segment has lower gross margins compared to NeraTel’s other business segments. Because of this, the company’s overall gross margins decreased due to an increase in proportion in revenue from the payment solutions segment. The good news, however, is this revenue is highly recurring.
  1. NeraTel’s payment solutions segment has to grow through volume. The ticket item for NeraTel’s payment solutions business is smaller compared to their other business segments. For example, a payment terminal is sold for about $250 whereas a router is sold for half a million, hence the volume needed. This is the reason why NeraTel is expanding aggressively outside of Singapore in order to scale their payment solutions business. Right now NeraTel’s payment solutions can be found in Singapore, Thailand, Indonesia, Malaysia, Vietnam, Myanmar, and the Philippines and the company is the largest payment terminal provider in South East Asia.
  1. Apple Pay is not a threat to NeraTel. When using Apple Pay, consumers have to tap their phones on a payment terminal in order to make payment. These payment terminals are built and sold by NeraTel. Hence, if mobile payment grows, more payment terminals are needed which will benefit NeraTel.
  1. NeraTel is selective on growth opportunities for their payment solutions segment. NeraTel calculates and ranks the payback periods for every growth expansion opportunity. They only take on opportunities with the shortest payback period. The management is rather conservative in this manner while looking to grow their payment solutions segment at the same time.
  1. NeraTel is helping hotels to build their wireless networks. NeraTel has been quietly successful in providing wireless network solutions for hotels. They are slowly gaining recognition in this segment and recently received their second order from Novotel Hotel.
  1. NeraTel in working to be a “solutions provider” for their clients. CEO Samuel Ang believes that providing overall solutions & services for clients instead of just selling equipment on a project-by-project basis will increase NeraTel’s revenue and improve their margins in the future. They are working on this direction to grow the company.
  1. There are now a record 200,000 NeraTel payment terminals in the market. Four years ago, NeraTel’s payment terminals numbered less than 100,000. They have been aggressively capturing market share and, if needed, lowered their prices to do so. NeraTel is now the largest payment terminal provider in Thailand and also have a large, sizable presence with major clients in Indonesia.

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Robin Han
Victor Chng

Victor Chng is an equity investor and the co-founder of the online investment magazine The Fifth Person. He is also the co-creator of The Investment Quadrant, an online multimedia stock investment course where students can learn how to invest profitably in the stock market. Victor has been featured multiple times on 938LIVE as a guest expert on MoneyWise and is also the co-author of Value Investing in Growth Companies which is internationally published by Wiley, Inc. The book can be found in all major book stores worldwide and on Amazon.com, Amazon.co.uk, Barnes & Noble and Apple's iBooks. If you're interested to learn more about stock investing, you can join The Fifth Person Newsletter and receive free weekly insights on how you can generate higher returns and dividend income from the stock market.