Ahead of Q1 results, Cantor Fitzgerald says buy Redline Communications

Look for the expansion of Redline Communication’s (Redline Communications Stock Quote, Chart, News: TSX:RDL) order backlog to begin to hit its bottom line, says Cantor Fitzgerald analyst Tom Liston.

Tomorrow, before market open, Redline will report its Q1, 2013 results. Liston expects the company’s topline will come in at $9.9 million, which is lower than consensus estimate of of $10.5 million. Liston says the company’s Broadband Wireless Infrastrucure will account for the vast majority of that revenue, up from $4.7-million to $9.3-million.

Liston says Redline is fast replacing lost RedMAX revenue with wireless revenue. RedMAX revenue, he notes, declined from $7.8-million last year to virtually nothing this year. Meanwhile, the company is beginning to record some of its biggest wins ever, including the April 16th announcement of its largest wireless oilfield contract to date, which was worth more than $5-million. In a research update to clients this morning, Liston maintained his BUY recommendation and $8.25 one-year price target on Redline.

Redline is one of the more decisive turnaround stories in the recent history of Canadian public tech. In 2009, current Redline CEO Eric Melka, who joined the company from Telemedia Ventures steered the company to a near clean sweep of the its business, management team, and board. Melak helped resuscitate the company after a disastrous bet on Wi-MAX, a wireless communications standard that was ultimately beaten out by LTE. The new Redline returned to its roots in providing broadband wireless equipment to niche markets. By developing what Melka called a “software driven hardware platform” and stopping all Wi-MAX development, Redline instantly reversed its fortunes, turning a loss of $10-million in 2009 to a profit of $4-million the following year.

Liston’s target is based on Our target is based on 15× fiscal 2015 P/E.

Shares of Redline Communications closed today up 5% to $6.34.

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