Redtone International Berhad

$REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD)
Research Report by APEX

NIISe Bid Race to be Revealed Soon: Who Will Emerge Victorious?

Recent reports suggest that $DNEX / 4456 (DAGANG NEXCHANGE BERHAD) and $THETA / 9075 (THETA EDGE BERHAD) are currently leading the bid for the National Integrated Immigration System (NIISe) project. According to sources cited by The Edge, the tender committee met last week to shortlist the proposed awardees, with an official announcement expected soon.

$IRIS / 0010 (IRIS CORPORATION BERHAD) originally secured the project in 2021 with a bid of RM1.16 billion. However, the contract was terminated in August last year due to delays.

The NIISe project aims to integrate border control systems across various units under the Ministry of Home Affairs, enhancing national border security and improving immigration management efficiency.

DNEX’s bid is higher, ranging between RM1.1 billion and RM1.2 billion, and proposes using the existing government system. In contrast, Theta's bid is lower at RM800 million, suggesting the development of a new border control system. Sources indicate that DNEX’s proposal is more standardized and rigorously tested, while Theta offers a cost advantage but needs to focus more on system development.

Rumors also suggest that Theta is preparing to poach senior executives from $HTPADU / 5028 (HEITECH PADU BERHAD), another shortlisted bidder. The NIISe project bid is highly competitive, with DNEX, Theta, and HeiTech Padu emerging as the final three contenders. Previously, $REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD) was also in the race. BJCORP founder Tan Sri Vincent Tan, who holds a 40.79% stake in REDtone Digital, has acquired 600,000 shares in Theta and 3.2 million shares in DNEX.

Despite REDtone Digital’s active maneuvers, they eventually paused, leaving DNEX, Theta, and HeiTech Padu as the top contenders.

Interestingly, Theta's share price has outperformed DNEX recently. Over the past month, Theta's share price has increased by almost 50%, while DNEX’s share price has decreased by 6%. This performance, coupled with Theta's recent contract awards, suggests that Theta might have a higher chance of winning the NIISe project.

The Edge's Centurion Club Awards 2024 sees $HARBOUR / 2062 (HARBOUR-LINK GROUP BERHAD) as the Centurion of the Year for 2024. This comes after Harbour was also shortlisted as one of Forbes' Best under a Billion club not long ago, which hopefully should put them on the radar of more people to look into and study their business.

Other companies that scored a triple winner on their respective categories (Highest RoE, highest growth in PAT, and highest returns to shareholders) in their sector include $DELEUM / 5132 (DELEUM BERHAD) $KOTRA / 0002 (KOTRA INDUSTRIES BERHAD) and $REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD) .

The award is evaluated based on the the scoring criteria of return to shareholders (30% weightage); PAT growth (40%); and ROE (30%) over three years.

While harbour is probably not likely to win this award again soon, as they are coming off of unprecedented freight rates in 2023 (and thus the benchmark they will have to compare with is unrealistically high in a normal business environment), I think they will still score rather well in general.

Anyhow, congratulations to all the winning companies! Are any of them part of your investment portfolios? The award winners could be a good place to start as a shortlist for further study.

OTHERSREDTONE DIGITAL BERHAD ("REDTONE" OR THE "COMPANY")
- DEALINGS IN QUOTED SECURITIES

Change in Boardroom - ENCIK SYED ALI SHAHUL HAMEED

Change in Remuneration Committee - DATO' AVINDERJIT SINGH A/L HARJIT SINGH

Change in Nomination Committee - PUAN SABARINA BINTI HARUN

Quarterly rpt on consolidated results for the financial period ended 31/03/2024

PROVISION OF FINANCIAL ASSISTANCE

OTHERSREDTONE DIGITAL BERHAD ("REDTONE" OR THE "COMPANY")
- DISPOSAL OF QUOTED SECURITIES

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Intention to Deal During Closed Period

$REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD) aims to get to RM1 bil within five years, eyes regional growth

https://cutt.ly/dw74cQI4

News appeared in edge, i thought he means rev reach RM 1b but he actually talking market cap

they already 700m mc, means aiming for 40pc growth in share price in the next 5 years.
another problem
when ceo start talking about market cap instead of biz, should you run?
a few ways he can try to hit the target,

PP
or
stop giving div
or
pump share price
or
issue warrant

to me, ceo talking about market cap target is nonono bad news

Quarterly rpt on consolidated results for the financial period ended 31/12/2023

PROVISION OF FINANCIAL ASSISTANCE

Change in Boardroom - PUAN SABARINA BINTI HARUN

Change in Audit Committee - PUAN SABARINA BINTI HARUN

$REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD)

$REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD)

OTHERSREDTONE DIGITAL BERHAD ("REDTONE")

LETTER OF AWARD FOR THE PROVISION OF "PERKHIDMATAN KOMUNIKASI DAN KOLABORATIF BERSEPADU KERAJAAN" ("MyGovUC 3.0") BY REDTONE ENGINEERING & NETWORK SERVICES SDN BHD ("RENS")

$REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD)
Research by RHB
Not Rated - Fair Value of MYR1.28

"Dialling In Record Earnings"

MYR1.28 FV based on 18x CY24F P/E. Our FV also implies 9x CY24F EV/EBITDA. REDtone Digital is set to book record earnings by CY24, buoyed by a surge in tower deliveries and a potential tender win. Its solid telco services, along with potential new revenue from Starlink’s satellite broadband and operations & maintenance (O&M) contracts post tower delivery, should bolster recurring revenue. The Cloud and IoT division should also turn profitable on higher contracts secured. As the stock is trading at 5x CY24F EV/EBITDA, this presents a compelling investment opportunity.

Analyst:
Queenie Tan
queenie.tan@rhbgroup.com

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Intention to Deal During Closed Period

@portoftheyear

PORTFOLIO OF THE YEAR 2024

1. $KEINHIN / 7199 (KEIN HING INTERNATIONAL BERHAD) @ 50%
A low-profile, well-run company equipped with an already expanded production capacity in Vietnam. Malaysia automotive segment is growing strong. Deep undervalued valuation. The cash pile is growing fast.

2. $REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD) @ 10%
A strong fundamental company with proxy to new Agong, 5G infra, Starlinks, thematic play.

3. $N2N / 0108 (N2N CONNECT BERHAD) @ 10%
Huge cash pile of RM153mil, with DY range from 4-8%. Diversifying into non-capital market businesses. Holding 25.15% of OMM (Australian Fintech Company), which is valued at ~RM92 million and started to make profit in the past 2 quarters. A thematic play for the bull market as well.

4. $OPENSYS / 0040 (OPENSYS (M) BERHAD) @ 10%
Installed CRM aprox. 7k+ units (~RM80k/unit) in the market are building strong and growing recurring income. New growth engines going forward: (1) SmartTCR with a potential market size of ~5k units (~RM110k/unit). (2) SmartCIT potential market size is RM800mil. (3) Potential of more BPO business (recent awarded RM105mil contract from Maybank). Light asset business with DY ~5%.

5. $ABLEGLOB / 7167 (ABLE GLOBAL BERHAD) @ 10%
One of the cheapest-valuation consumer companies in the market. Mexico JV Business is going to accelerate its business growth. DY ~4%.

6. $SHANG / 5517 (SHANGRI-LA HOTELS (MALAYSIA) BERHAD) @ 10%
Bottom-catching asset play.

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - BERJAYA CORPORATION BERHAD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - JUARA SEJATI SDN. BHD.

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - BERJAYA GROUP BERHAD

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : RELATED PARTY TRANSACTIONSREDtone Digital Berhad - Acquisition of Shares in Berjaya Food Berhad

OTHERSREDTONE DIGITAL BERHAD ("REDTONE" OR THE "COMPANY") - PURCHASE OF QUOTED SECURITIES

EPF, as well as other global Towerco Companies and PE Funds, could be looking to purchase a stake in Edotco. Are TowerCo acquisitions on the move again since interest rates are no longer expected to continue to rise?

Source: Various articles over the internet including Axiata's interview with the Edge about 6 months ago.

"Sources" say that EPF is conducting its due diligence on Edotco while Khazanah and Japan-based INCJ Ltd is looking to exit.

Edotco, the world's 6th largest Towerco, has 4 main shareholders : $AXIATA / 6888 (AXIATA GROUP BERHAD) 63%, INCJ 21.14%, Khazanah 10.57% (which also owns 37% of Axiata), and KWAP 5.29%.

Being a very capital intensive business, Edotco is said to be looking for yet another round of fund raising. In light of the current high interest rate environment, they are not keen to undertake an IPO right now, so they are said to be exploring Private Equity.

In 2017, Edotco was valued at USD 1.5bil (around RM 6.6+bil at the time). At that time, they owned and managed about 26,000 towers across the region. Since then, they had made aggressive acquisitions from debt, in part due to the low interest rate environment, and increased their Tower portfolio to almost 58,000 towers across Malaysia, Indonesia, Myanmar, Cambodia, Philippines, Pakistan and so on. Noticed how I wrote "owned and managed"? The actual number of towers owned is 32.7k with average Tenancy of 1.64x while 25.4k are managed towers.

I covered many of the (rather high profile) acquisitions back in 2020-2022. Anyway...

In the same period of time (fy17-fy22), their liabilities climbed from ~RM 700mil to over RM 8.4bil. Meanwhile net profit only increased from RM 170mil to RM 200 mil in FY22, in large part due to rising USD, and also high finance costs.

In 2023, the Liabilities would have climbed even more-- they took a USD 700mil syndicated loan and a RM 1.4bil SUKUK issuance on top of that, of which the interest rates are not disclosed but is expected to be high.

In an ideal situation, a towerco should take borrowings if the returns from the acquisition can service the loans with sufficient returns. However, the sudden sharp rising of interest rates is putting Edotco and other towercos into an awkward position as investors have more options for low risk steady yields rather than investing in utility and recurring income companies.

Axiata's CEO reportedly said that they aren't looking to pump more money into Edotco, as Axiata themselves are not in a healthy balance sheet position and would consider giving up its majority stake if the valuation is right.

In other news, plenty of other parties are said to be interested in bidding for that stake-- including Japan's NTT Docomo together with Mitsui & Co, CVC Capital Partners, and so on, with Docomo+Mitsui looking for about USD 750mil for a majority stake. It wasn't specified how big a stake it could be, as majority stake could typically mean 50%+1 or more-- or in some cases as low as 33.3%.

Let's drill into Edotco's numbers a little bit more, so it's easier to compare with the other listed company with towerco exposure in Malaysia namely $OCK / 0172 (OCK GROUP BERHAD) and $REDTONE / 0032 (REDTONE INTERNATIONAL BERHAD) to a lesser extent.

Numbers at FY2022

Edotco
Total towers owned: 32.7k with TR of 1.64x ; Managed: 25.4k
Revenue of RM 2.5b
EBITDA of RM 1.6b
PATAMI of RM 191mil
Total Liabilities of RM 8.4b
Most Recent Publicly Known Valuation (2017) : RM 6.6bil

valuation ratios based on latest financials:
P/S : 2.64x
P/EBITDA: 4.13x
P/E : 34.56x

How does that compare with the others?

General Meetings: Outcome of Meeting

Change in Remuneration Committee - DATO' MOHD ZAINI BIN HASSAN