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Friday, July 18, 2014

REDtone targets to seek transfer to Main Market in September (Edge)

Maintain outperform with target price of 81 sen: REDtone is believed to be participating in establishing a teleradiology hub in the city to cater to both domestic and regional hospitals. The hub is expected to have a pool of radiologists who will interpret computerised tomography (CT) scans, magnetic resonance imaging (MRI) and even ultrasound images and this will allow the participating hospitals to improve their operational efficiencies as well as reduce their in-house specialist costs. While REDtone is reluctant to elaborate at this juncture, the project is expected to contribute positively to the group’s future earnings if it materialises.

The Malaysian Communications and Multimedia Commission (MCMC) is expected to announce the successful bidders of the public cellular service tendering process under the TIME 3 (T3) extension project in the coming weeks. The T3 extension project is expected to be worth about RM800 million and it will be segregated into two clusters, namely the installation of tower and infrastructure (Part 1) and the installation of equipment and electronics related to public cellular service under the concept of radio access network (RAN) sharing technology (Part 2).

While the project details have yet to be revealed, management believes there is a fair likelihood for the group to participate in the project due to its vast industry knowledge, respectable track record and technical know-how.

REDtone is targeting to submit its application to transfer the company’s listing to the Main Market of Bursa Malaysia after the release of its financial year 2014 (FY14) audited accounts in September.

Management is confident of posting its third consecutive year of profitability in FY14, thus meeting one of the transfer’s listing requirements (uninterrupted audited profit for three to five full financial years with an aggregate profit after tax [PAT] of at least RM20 million and a PAT for the most recent financial year of at least RM6 million).
Note that REDtone had recorded net profits of RM2.2 million, RM25.2 million and RM14.7 million in FY12, FY13 and 9MFY14 respectively. — Kenanga Research, July 17

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