Wednesday, April 24, 2013
Redtone- black is better than red!
Redtone International Bhd ('Redtone') is slowly recovering from its loss-making streak over the past 3-4 years. The turnover was achieved by disposal of its loss-making businesses and repositioning itself in the data & broadband space. For more, check out this article in The Edge newsletter.
For QE28/2/2013, Redtone reported a net profit of RM3.9 million- a slight decline of 1.3% q-o-q but a 8-fold improvement over the same quarter last year. Revenue soared 52% q-o-q or 72% y-o-y to RM40.5 million.
Table: Redtone's last 8 quarterly results
Chart 1: Redtone's last 8 quarterly results
As at 28/2/2013, redtone's financial position is deemed healthy with current ratio at 1.2 times while gearing ratio is negligible, with bank borrowing of RM2 million as compared to Shareholders' Funds of RM97 million. Cash & bank deposits amount to RM34 million.
Redtone (closed at RM0.415 yesterday) is now trading at a trailing PE of 19 times (based on last 4 quarters' EPS of 2.18 sen. I expect Redtone's current earning to improve to 3.5-4.0 sen; thus bringing down PE to 11-12 times.
Redtone is in an intermediate uptrend line, S1-S1. It is poised to test its recent high of RM0.45 while its immediate support is the horizontal line RM0.42 (see Chart 2). An upside breakout above RM0.45 could send the stock to RM0.82. (see Chart 3).
Chart 2: Redtone's daily chart as at April 24, 2013_4.00pm (Source: quickcharts)
Chart 3: Redtone's monthly chart as at April 24, 2013_4.00pm (Source: quickcharts)
Based on the turnaround story, exciting future prospects (supported by recent financial performance) and potentially positive technical outlook, Redtone could be a good stock for long-term investment.
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Redtone.