Stifel Nicolaus analyst Blair Abernethy says Redline Communications (Redline Communications Stock Quote, Chart, News: TSX:RDL) planned acquisitions will broaden its customer base and accelerate it growth.
Yesterday, after market, Redline announced it had completed a $10.61-million private-placement, selling 1,769,083 units at a price of $6.00 each. The company said the money will be used for general working capital and to “assist in the implementation of the company’s growth strategy”.
Abernethy says yesterday’s financing puts Redline in a better place to complete its two pending acquisitions. One June 20th, the Eric Melka-led company announced it had entered into non-binding agreements to acquire to unnamed companies its its space, one in North America and one in the Middle East.
The Stifel Nicolaus analyst says he is awaiting more details, but these pickups are likely part of Redline’s plan to capture a larger share of its current customers communications projects by offering a more turnkey solution.
Abernethy says he believes Redline will enjoy long term double digit growth with margins near 20%. And while he continues to rate the company as a BUY, he says he is lowering his price target slightly due to the dilutive effects of this financing. His new target on RDL is $7, down twenty-five cents from his previous $7.25 target.
On August 14th, Redline will report its Q2, 2013 results. Abernethy thinks the company will earn two cents a share of revenue of $11.9-million, which is slightly higher than the street’s topline expectation of $11.7-million.