Nera Telecommunications’ (SGX: N01) share price has fallen 47% from 77.5 cents to 41 cents (as at 19 December 2016). The reason for this fall is due to the company’s disposal of its payment solutions business unit to Ingenico Group for $88.4 million.
If you recall, the initial reason why I invested in NeraTel three years ago was the growth of its payment solutions business. Due to its business model, the payment solutions business generates stable, recurring revenues – and a company with stable, recurring revenues usually trades at higher valuations.
So when NeraTel announced the sale of its payment solutions business in May 2016, I was disappointed (even though NeraTel mentioned they would pay a special dividend to shareholders as a result of the sale). Firstly, I felt the business still had huge growth potential and NeraTel was selling out too early. Secondly, the sale meant that ......