Redline Communications an undervalued player on wireless broadband field.
Redline Communications
49 cents/share
www.redlinecommunications.com
52 wk high $6.49, low 31 cents
Redline Communications (TSX: T.RDL, Stock Forum) is one of the few microcap tech stocks we're bottom fishing right now and was introduced in this price range over the summer. Now that we have a backstop to the financial crisis, this is a good time to bottom fish a few key companies. Redline has approximately $15 million in net cash (71 cents/share) and $13 million in inventory (62 cents/share) - yet the stock continues to trade at a large discount to the cash alone. Redline continues to incur moderate operating losses but with over $30 million in annual revenue it’s hard to imagine the market would not only value the inventory and business itself as worthless, but grossly discount the cash. Near this low, it's a company well worth the time to research.
We have only looked at a couple techs in 2008 but have had tremendous success with bottom fishing cash-rich stocks (when they are near or below cash value). Even if this company generated $20 million in revenue ALL YEAR, the market gives them ZERO value for the business model. Unless they burned through all their cash at ridiculous rates for the next six months, they would still only be down to current cash values. The business model is once again being deemed as worthless by the market.
The WiMax industry is just starting to garner media attention as a small fortune is now being spent by a few of the largest chip makers and telecommunication companies. At a conference this month, the WiMax Forum provided the following stats:
Out of six billion people on Earth, about three billion now use mobile phones and a billion are connected to the Internet. But only 400 million people have a high-speed Internet connection, meaning that WiMax wireless broadband has a big opportunity to "capture a big chunk of the market," said Ron Resnick, president of the WiMax Forum.
There is also a good overview of the industry here: http://news.cnet.com/8301-1035_3-10057282-94.html
Redline has announced several important developments the past few weeks - all of which have been ignored in this market. Given the fact a person can buy nothing but their cash at a discount, this is well worth researching.
September 24: RedMAX 4C mobile WiMAX passes rigorous testing required for WiMAX forum certification. Company verifies that Redline products meet stringent requirements for performance and reliability on mobile devices.
September 30: Redline Communications and Starent Networks, Corp. (NASDAQ: STAR, Stock Forum), a leading provider of infrastructure solutions that enable mobile operators to deliver multimedia services, have formed a partnership for the co-development of a complete mobile WiMax solution.
Also:
- Aptilo Networks, the global leader in preintegrated solutions for service management and access control for wireless networks including WiMAX, wireless mesh and Wi-Fi hot spots, and Redline Communications have entered into a global technology agreement to use Aptilo's service management and access control solutions in Redline's RedMAX 4C mobile WiMAX deployments worldwide.
- Redline Communications Group Inc. and Tech Mahindra, a global systems integrator and leading provider of IT solutions to the telecom industry, have signed a global partnership agreement to deliver Mobile WiMAX solutions. The companies will begin their first joint Mobile WiMAX deployments for selected carriers in the Asia-Pacific region in 2008.
Disclosure: Danny Deadlock owns 20,000 shares of RDL.
