Dear all,

After studying market trends I have come to the conclusion, rightly or wrongly, that last years worst losers are often the winners of this year and the next.

Some of you may realise this is why I went into mining sector from October 1999 after the BRE-X sell off from March 1997, I am hoping I can repeat this in TMT stocks, as indeed 2001/2002 has been for me in Insurance Stocks at Lloyd's post WTC and September 11th 2001 (average ILV rise 55.54% per yesterday's close 12 ILVs 01.10.2001-14.12.2002).

My conclusion is based on a typical bull or bear phase lasting up to 34 trading months to 68 trading months (actually trading periods of 21 days, actual periods of 28 days or moon cycles IMHO).

Although bearish on equities generally, ie expecting a double dip recession, with bottoms in place at around 31.80 months on FTSE (close on 34 moon cycles) on 24th September 2002, from high on FTSE of 6950.60 on 30th December 1999, plus further low I expect either at 55 moon cycles or at 68 moon cycles, I am still bullish short term, say to March 2003, then again to June 2003 on Telecoms.

The reason is simple, I really do not think certain stocks can go down any further indeed the sector has been rising dramatically on the least sniff of a bull market, and when telecoms rise they rise fast (refer TWT 1.10p to 4.75p in three days recently)IMHO.

I therefore had a look at the sector to try and find the stock which to me seemed the most undervalued, most bombed out with the strongest fundamentals on cash asset backing, lowest gearing, and lowest cost per pound of revenue, plus a market capitalisation below my US$50m (&pound31.25m-&pound33.33m)threshold with the greatest upside potential risk/reward ratio IMHO.

The latest interims to 30th September 2002 released on 21st November 2002 stated certain elements I very much liked including:-

Cash &pound10,155,000 per 30.09.2002 I calculated 0.364p per share over 2,789,070,648 shares in issue at reference date.

Gross profit up 40.3% on same period last year to &pound9,389,000, I assumed this continued full year implied x 2 =&pound18,778,000

Debt seemed to have been reduced from &pound22m per ADVFN data, implying net gearing 55.59% to just &pound436,000.

My maths said can this be right is RED really only costing at 0.60p offer say &pound16,734,000, ie &pound7,015,000 net cash &pound10,155,000 plus debt &pound436,000 for a business with a &pound76m to &pound86m estimated annual turnover?

Less than 10p in the pound?

Press release data included as follows:-

"INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2002

Redstone, the national communications services provider, announces its financial
results for the six months ended 30 September 2002.


FINANCIAL HIGHLIGHTS


Further progress on margins and cash from continuing operations:

O Gross profit up 40.3% on same period last year to &pound9.389 million. Gross
profit now represents 25.5% of revenues, up from 16.6%, and also up from
23.0% in the 6 months to 31 March 2002.

O Operating loss before goodwill amortisation and impairments reduced by
77.5% to &pound1.998 million from &pound8.876 million.

O EBITDA loss reduced by 81.7% to &pound0.990 million from &pound5.418 million.

O Revenue increased marginally compared with the 6 month period to 31 March
2002, which, as set out in the Annual Report, was down from the period to
30 September 2001 reflecting management's focus on margin enhancement.

O Operating costs excluding goodwill amortisation and impairments reduced
by 27.0% to &pound11.567 million from &pound15.849 million at 30 September 2001.

O Cash balances at 30 September of &pound10.155 million.

O Borrowings at 30 September of &pound0.436 million.


OPERATIONAL HIGHLIGHTS

O Increased sales and marketing headcount, during the period, to 102 as at
30 September 2002.
O Order intake improved during the period, with key contract wins notably
in IP telephony systems.
O Awarded Cisco "GOLD" accreditation status.
O Continued reorganisation to improve customer service and efficiency
whilst reducing cost.
O BT Wholesale partnership completed."

The all important charts, after a somewhat over enthusiastic rise last week when RED went up 79.78% day 1 0.445p to 0.80p (high 0.835p), and a further 38.75% day 2 high to 1.11p, before not unsurprisingly profit taking or short selling, RED has today completed a hammer bottom intraday reversal from 0.49p mid to 0.56p mid, which I count as a bullish signal:-



Longer term charts show I think March 2000 high per ADVFN at around &pound10.10/&pound10.20, somewhat irrelevant I understand only approx 86m shares out then even so market cap was &pound868.60m to &pound877.20m, now there are around 2,789,070,648 shares out per 30.09.2002 RNS 21.11.2002 I calculate this market cap would represent 31.14p to 31.45p over no in issue above.

Still a fair risk reward ratio IMHO at 0.60p

I am not sure of a fair short term target, but 1.12p is US$50m, after which I would expect institutional attention. My gut feeling is telecoms can trade to 2.50 to 3.00 times annual turnover, if so 2.50x &pound76m to &pound86m equates to &pound190m to &pound215m to 3 x equates to &pound228m to &pound258m.

Whichever way I looked at it I thought RED was worth 6.80p to 9.25p over the above number of shares in issue.This still represented in excess of a 10 to 1 to 15 to 1 risk reward play to me, although doubtless I will trade the volatility on the way.

All IMHO, NAG, DYOR etc, etc

Comments bull bear welcome, I am long.

Best regards

Ash

2,100,000 sell at 0.45p and RED is down 11% on no news.

Seems well overdone to me, with no bad news from the company and a very strong EBITDA/Cash NAV per share plus more positive sentiment towards the share recently, well at least buyers coming in at 0.50p.

Bloody silly IMHO

What happened to Ash? Are you having as personality crisis? What does he think?

Good time to pick up more. Never thought we would see it this low again.

regards

Giant Haystack,

Well we are at least seeing a hammer reversal thank my giddy aunt.

Teletiger,

Looks like a few see it that way.

Cheers

Ash

Teletiger,

Definite hammer bottom reversal hourly, head 0.015p 0.510p/0.525p tail 0.04p 0.515p/0.475p

And what does Ash think?

Well Mr Haystack Sir,

I think that RED has done a hammer on high volume, so I am feeling far happier!



Better volume too >13m

Given the market overall I think RED is looking fairly strong!

Cheers

Ash

Teletiger,

Did you read Shares Magazine?

According to Shares Magazine page 29 who referred to it as RED has I quote:-

"Redstone has started life with huge networking ambitions. It dumped them last year, selling it's system to BT. It now purely installs and manages networks for corporate customers. Capital spending nearly dragged it down. Now it looks like an interesting recovery opportunity."

The change in Redstone's management is sumarised as "Nimble managements can pull back from disaster and find a new course. Redstone has already done this."

Personally in a downwards market where most shares have reduced in shareprice, I find the fact that RED has increased from a September 2002 low of 0.375p to the current 0.535p, ie 42.66% with a peak at 1.11p 2.96 times the bottom in a bear market refreshing.



The FTSE in reality during the same period has managed no rise at all.

Best regards

Ashley

Ash , Shares mag reckoned that Holmes Place was going to be bought out for 130p.

Don't believe everything you read , think they make half of it up.

:-)

ROFLMFAO !

;-

DIL,

You know I just fancied the journo!
I believe everything I see in the media (;-))

Anyway Telewest has already started up so far up 18.60%, RED normally follows TWT for some reason IMHO.

Come on Beeson Gegory pull your finger out!

Cheers

Ash

Bollox!

Bollox!

ROFLMFAO !

Bloody hell RED has gone BLUE, I had better grab a chair to sit down!

Looks overbought to me Ash :-)

ROFLMFAO !

Pile of crap IMHO DIL.

Hope you are not long! RED is Wales's colour so what do you expect?(;-))

Dil,

Joking aside, still long in RED Telewest is already up 14% so really RED should soon start going up I would have thought!

No idea why down 9.50% today on one sell of 1m (4,500)

SEEMS TO HAVE STOPPED FALLING AND FTSE JUST HAD A NICE RUN