Period  1Q15

Actual vs. Expectations Redtone (RIB)’s 1Q15 PATAMI of RM4.4m (21% YoY; -44% QoQ) came in within our expectation and accounted c.15% (vs. 1Q14: 16.2%; 1Q13: 8.0%) of our full-year estimate.

Dividends  Proposed a single-tier final dividend of 1.1 sen for FY14, subject to the shareholders’ approval at the forthcoming AGM.

Key Results Highlights YoY, 1Q15 revenue declined by 5% to RM34.2m mainly due to the lower contribution from its data segment (-36% to RM14.4m) as a result of the lower T3 project recognition (RM4.5m vs. RM18.3m in 1Q14). Its Voice segment, meanwhile, saw turnover climbing 4% higher to RM16.0m in 1Q15, thanks to the higher contribution from its MVNO business. PBT, meanwhile, improved 8% to RM5.0m on the back of high-margin project recognition. The higher PBT coupled with a lower-than expected minority interests cost led RIB to report higher PATAMI of RM4.4m (21%).

 QoQ, turnover was lower by 8%, no thanks to lower data segment revenue as a result of delays in billing. PBT, however, dipped 50% to RM5.0m mainly led by lower-margin projects recognition.

Outlook  The planned transfer of listing (to the Main board) is now expected to be delayed to early CY15 in view of the recent qualified opinion made by its external auditor.

 While the news is expected to dampen the trading sentiment in the near term, its outlook is expected to be enhanced significantly should RIB manage to seal more government & corporate data related projects (i.e. teleradiology & healthcare solutions).

Change to Forecasts We have lowered our FY15E PATAMI earnings to RM29.9m (-0.7%) after finetuning.

Rating Maintained MARKET PERFORM

Valuation  Maintained our RIB target price at RM0.77 based on unchanged FY15E targeted PER of 14.5x (+0.5SD).

Risks to Our Call Failure to secure more corporate and government projects.

Source: Kenanga