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NeraTel: Is there no telling how high it could go?

Wednesday, July 3, 2013

The share price of NeraTel broke 65c resistance yesterday and it has been rocketing up since. A friend told me that I have done it again! Honestly, I think Lady Luck's the one who is working hard here. I am just lucky.

Last month, I increased my investment in NeraTel by about 10x, recognising its strong numbers and also its attractive dividend yield. At 60c, a 4c dividend represents a yield of some 6.67% which is pretty decent. Even at 63c, 4c gives us a yield of some 6.35%.

Technically, it is quite easy to see from the chart why I accumulated at 60c to 63c. The counter seemed to be basing in that range.




The new found strength in NeraTel's share price probably has a Myanmar connection. Two of NeraTel's customers, Telenor and Ooredoo, won contracts in Myanmar and have 9 months to commence operations. They will have to open up project tenders soon and NeraTel has a good chance of winning the tenders. OSK DMG has a target price of 79c for the counter.

What is my plan now?

I really have to examine my motivation for investing in NeraTel. When I first bought in at 40.5c, it was primarily for the attractive dividend. Recently, I increased my exposure to the counter with a slightly better understanding of the company, still liking the numbers and the attractive dividend.

Even if its share price should hit 79c, dividend yield is still a reasonably attractive 5.06%.

However, I suspect that Mr. Market is now pushing up the share price of NeraTel based on expectations. So, although I do not think NeraTel's shares are expensive even now, things could get bubbly if this continues. Traders chasing the breakout must do so knowing the risks.

Breaking a many times tested resistance at 69c on the back of high volume is very bullish. However, parabolic movements in prices are usually unsustainable and we could see a pull back as price tries to find support.

69c could be the resistance turned support and, for anyone who is thinking of buying on weakness, that is probably a price to watch out for.

In the meantime, to all fellow NeraTel shareholders, if we would like to divest partially (or fully) to lock in gains, there is certainly nothing wrong with taking profit. However, I would ask that we look once more at our motivations for being vested in the counter to be sure. In any case, congratulations!

Related post:
Which stocks have I been accumulating in June 2013?

9 comments:

B said...

Hi AK

Wow you increased your position by 10 times. Looks like us small retailers have to thank you for pushing up the price :) just joking.

Like you I hv added this shares when it was at 40 cents plus. Itnhas another 9 percent gains today. Bravo and all the best to all nera investors.

AK71 said...

Hi B,

I don't think I did much. I just waited for Mr. Market to sell to me at 60c to 63c last month and he did. ;)

Cory said...


In a sea of red in my portfolio today, is comforting to have a green lighthouse standing tall.

I was attracted to the yield earlier too. Nice to have a great story behind it now.

thanks for your earlier recommendation. Vested.

AK71 said...

Hi Cory,

A fellow NeraTel shareholder? Haha.. Congrats. :)

OT83 said...

Hi ak,

Increase by 10x? At least 100k. Ak earn another 5 digit. So huat! Congrats!

OT

AK71 said...

Hi OT,

You said I made you sound like a stalker last time. So, I shan't say anything this time. ;)

Tien Song Chuan said...

"In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond."

Read more: http://www.marketfolly.com/2009/09/top-25-warren-buffett-quotes.html#ixzz2Y2mlKnbU

AK71 said...

Hi Tien,

Thanks for the reminder. :)

AK71 said...

Nera has already began deploying payment solution terminals for the biggest banks operating in Myanmar and their prior experience with operating in frontier economies such as Afganistan and Pakistan would also help them set up operation in Myanmar.

Lim & Tan

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