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Redline's diversification efforts will soon make contribution, says Cantor Fitzgerald Canada

redline-communications-400x297A dragging energy market isn’t shaking Cantor Fitzgerald Canada analyst Ralph Garcea’s faith in Redline Communications (TSX:RDL).
Yesterday, Redline Communications reported its fourth quarter and fiscal 2015 results. In the fourth quarter, the company reported an EBITDA shortfall of $1.1-million on revenue of $5.1-million, a topline that was down 39 per cent over the same period last year. Management noted that order bookings for the quarter were $7.3-million, down 39 per cent over the same period last year.
Redline CEO Rob Williams talked about the company’s attempts to diversify.
“Redline is continuing to develop business from non-energy-sector clients,” he said. “With the recent hiring of an experienced vice-president of sales and marketing, the repositioning of our products to be more attractive to the telecom service provider market and the upcoming introduction of a new [long-term evolution]-based product line, we are confident that our revenues should grow. We are already seeing a shift in market mix with approximately 62 per cent of 2015 order bookings coming from the non-energy sector compared with 50 per cent in 2014.”
Garcea notes that Redline’s new LTE product is in three trials with a service provider, a military customer, and an energy customer. He thinks this product offering will begin to add revenue by the second half of 2016 and through 2017.
“As a result of the continuing weak rig count data, we expect a continued ‘energy drag’ for RDL,” says Garcea. “Longer-term, we expect RDL to benefit from the growth in the industrial M2M (machine-to-machine) and IoT (Internet of Things) markets. At the end of September 2015, the Company undertook a minor restructuring, reducing the number of employees and contractors by 14 – reducing annual costs by $2M.”
In a research update to clients today, Garcea maintained his “Buy” rating and one year price target of $5.00 on Redline Communications, implying a return of 150 per cent at the time of publication.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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