Wednesday, March 20, 2019

Redtone: Higher Earning Due to Higher MTNS Revenue

Result Update

For QE31/1/2019, Redtone's net profit increased by 116% q-o-q or 7-fold to RM5.4 million while revenue rose 52% q-o-q or 66% y-o-y to RM45.4 million. Revenue rose q-o-q due to higher revenue from Managed Telecommunication Network Services ("MTNS") segment. The Group's profit before tax rose q-o-q due to higher revenue in the MTNS segment (see Table 2 below).


Table 1: Redtone's last 8 quarterly results

Table 2: Redtone's segmental results for QE31/1/2019 

From Table 3 below, we can see that MTNS segment is now catching up with the Telecommunication Services segment. If MNTS segment can match the performance of the Telecommunication Services segment, Redtone's bottom-line will be much better than what's it like today.


Table 2: Redtone's 9-mth segmental results 


Graph: Redtone's last 32 quarterly results

Financial Position

As at 31/1/2019, Redtone's financial position is healthy with current ratio at 2.5 times and gearing ratio at 0.4 time.

Valuation

Redtone (closed at RM0.26 yesterday) is now trading at a trailing PE of 14 times (based on last 4 quarters' EPS of 1.79 sen).  At this PE, Redtone is still deemed attractive for a turnaround stock with room for further growth. 

Technical Outlook

Redtone has broken above its downtrend line at RM0.24 on March 13. If it can also take out the immediate downtrend line, RR with resistance is at RM0.32-0.33, Redtone's uptrend may begin.


Chart: Redtone's weekly chart as at Mar 19, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on the turnaround story, exciting future prospects, healthy financial position and mildly bullish technical outlook, Redtone could be a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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