News  Redtone (RIB) announced that D.Y.M.M. Sultan Ibrahim Johor had emerged as a substantial major shareholder of the company with 20.13% stake or 134m shares.

Comments  The strong shareholder will no doubt further enhance RIB’s profile and edge in projects bidding moving forward, especially from companies controlled by the Johor state’s government and/or other government related projects.

 Meanwhile, with Tan Sri Dato’ Seri Vincent Tan and his companies (Juara Sejati S/B and others) currently holding more than 28% stake, we do not discount that there could be some interesting corporate exercise in the making.

Outlook  RIB is still aiming to transfer to Main Board listing after resolving the accounting dispute on its FY14 accounts. To recap, Messrs. Crowe Horwath, the company’s external auditors, have expressed a qualified opinion in their report in respect of a debt owing by a third party that stood at RM15.6m for the financial year ended 31st May 2014.

 Other near-term catalysts, which management believes could materialise within the next few months, include: (i) continuous government & corporate datarelated projects (i.e. teleradiology & healthcare solutions), and (ii) successful transfer to Main Board listing.

Forecast  We make no change in our earnings forecast given the fundamentals of the company remain intact.

Rating Maintain MARKET PERFORM

Valuation  Maintained target price at RM0.77 based on unchanged FY15E targeted PER of 14.5x (+0.5SD). Although the group’s share price is currently trading above our fair value, we advocate investors to continue holding the shares and wait for the abovementioned catalysts to materialise.

 Meanwhile, we also do not discount that the share price could react positively, following the emergence of the strong shareholder.

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

Source: Kenanga