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Wednesday, January 23, 2013

Redtone gets 'outperform' call (BT)

Kenanga Research expects Redtone International Bhd to post a strong net profit of RM23.6 million in 2013 and RM25 million in 2014, underpinned by the contribution from universal service provider (USP) project and resource sharing fee from Maxis Bhd.

It said the integrated telecommunication solution service provider was expected to receive a positive earnings contribution from the recent award of a RM82.5 million three-year USP project in Sabah by Multimedia Commission and Communication Malaysia.

The company is also expected to receive a handsome resource sharing fee and a series of recurring incomes from Maxis under its 10-year resource sharing fee agreement, it said.

The research house said the agreement with Maxis could provide vast synergies to Redtone as the company would be able to ride on Maxis' network and launch its data services through the combined 2.6GHz spectrum, as well as, have a significant and immediate capital expenditure savings of approximately RM390 million to cover 50 per cent of the country's population.

It said while Redtone's near-term catalysts would mainly be led by the USP project and spectrum resource sharing fee, its future earnings were likely to depend on the ability to secure more USP projects and the degree of aggressiveness of Maxis' 4G services rollout.

Kenanga Research said Redtone was tendering for government contracts worth about RM500 million with a key focus on various USP programmes.

The company has a historical average tender book success rate ranging between 10 and 20 per cent. The research house has initiated coverage on Redtone with an "outperform" view and a target price of 56 sen. -- Bernama

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