Telechoice International looks like a Neratel 2.0 with an execution issue.
I am not going deep into this article but just going to briefly mentioned this.
Per Google Finance,
TeleChoice International Limited is an investment holding company. The Company is a regional diversified provider and enabler of info-communications products and services.
The Company operates in three segments: Personal Communications Solutions Services, Info-Communications Technology Services and Network Engineering Services.
Personal Communications Solutions Services division provides fulfillment, distribution and supply chain management services relating to mobile communication devices and accessories. Its spectrum of services include forecasting, purchasing, financing, logistics, warehousing, inventory support, road show management, retail customer premises equipment (CPE) stocks management, and after sales service.
Info-Communications Technology Services division is a regional integrated info-communications solutions provider.
Network Engineering Services division is a regional provider of network engineering services and supplier of specialized telecommunication products.
Telechoice is not a new business but have been around for some time. Long story short this was spun off ST Telemedia (if I remember correctly) and its appeal is that much of its original business was done in relation to subsidiaries of ST Telemedia.
Think Sunpage IDD and Starhub.
The biggest revenue portion comes from Personal Communications Solutions which provides distribution services for handphones and its infocomm and network engineering services deals heavily with telecom orders.
Like Neratel, majority of their customers seems to be related to telecom backbone operations sans the smart devices distribution business.
Acquisitions and new Head
Recent times, they bought over 2 system integrators in their info-comm technology services.
And they have a new CEO in Vincent Lim a Singtel man with 30 years of information technology experience.
My thoughts is that Telechoice International does not look cheap but the development can be good to watch.
Their infocomm division have been taking a hit and thus the 2 system integrator purchase.
To be fair system integrators on a small scale is not a really attractive business, but I can see perhaps some opportunity for Mr Vincent Lim to take advantage of this.
Very stable share price
Since its listing 10 years ago, share price have not gone anywhere. That is even in 2008-2009 during the financial crisis.
Perhaps this is due to the low liquidity and that Temasek indirectly owns 50% of it.
Even today, the total volume is 13 lots.
Debt, Cash Flow, Dividend Payout
Just like Neratel, there is something about these IT firms that the working capital just make it hard to see a smoothed free cash flow.
There are years where they have negative working capital but still pay a consistent dividend.
I think an investor could possibly add up 4 or 6 years of free cash flow to see their quality of conversion from net income.
If they are overpaying it, their dividends don’t seem to be the case:
2013 – $0.016
2012 – $0.016
2011 – $0.018
2010 – $0.0175
2009 – $0.02
2008 – $0.025
2007 – $0.0125
2006 – $0.0175
2005 – $0.039
2004 – $0.02
In total, they have returned 20.15 cents.
This used to be an 8% yielder, but 6.6% looks alright.
The dividend mandate is to pay out at least 30% of net income as dividend.
Dividend looks to be going down, that is perhaps due to weakening earnings. Still if you talk about paying below net income, that is what they keep to.
Business is net cash for a long time.
Would I buy this? Perhaps, perhaps not. Still a work in progress.
But folks with this competency may want to look into it.
Lots of long term questions and answer on their site.
I still feel this is fairly valued, unless Vincent Lim brings his rainmaking contacts in a big way, then that may be a game changer.
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