REDtone 3Q net profit dips 36.8% on lower data project revenues, higher costs

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KUALA LUMPUR (Apr 30): Data and broadband services provider REDtone International Bhd registered a 36.8% drop in its net profit for the third financial quarter ended Feb 28, 2015 to RM3.15 million or 0.61 sen a share from (3QFY15) RM4.99 million or 0.99 sen a share a year ago.

Revenue also fell 3.4% during what REDtone has described to be the its historically “low quarter”. Revenue came in at RM39.52 million, lower than the RM40.92 million recorded in 3QFY14.

“This year we experienced a slight growth. This growth, however, was not sufficient to support the drop in data project revenues which coupled with higher costs has resulted in a higher percentage drop in revenue for the same period,” it said in a filing with Bursa Malaysia today.

“Despite having a healthy project inventory, the group has experienced this drop in project revenues culminating from various inter-related factors, namely, roll-out delays, equipment ordering lead times and technical configuration complications,” it added.

REDtone’s growth in projects and new initiatives had also impacted its net profit as its wage bill and other related costs increased.

For the cumulative nine-month period (9MFY15), REDtone’s net profit contracted 12.3% to RM12.88 million or 2.47 sen a share from RM14.68 million or 2.9 sen a share a year ago.

This came on the back of a 10.2% improvement in REDtone’s revenue for 9MFY15 to RM118.49 million, from RM107.48 million a year ago.

The group did not declare any dividend for the quarter under review.

Moving forward, REDtone (fundamental: 2.3; valuation: 0.5) said that its data, broadband and managed services will continue to support the group’s earning potential.

“With this strong recurring revenue streams and healthy growth in our corporate data services and government data projects, we expect to continue to perform well,” it said.

REDtone shares closed unchanged at 79 sen today, bringing a market capitalisation of RM529.22 million.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)