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

utilitiesplus,

How do telecom Plus advertise?, I have never heard of them and nor has anyone I know

FTSE is going nuts looks like a very, very big FTSE rally in motion.

Sombrero,,telecomplus plc use referal marketing through independant distributors like myself to spread the word,we recieve a residual income for life for our efforts..It has its advantages in terms of customer gathering because we manage to keep the costs down..For example no sales people to pay,no advertising costs,no shops to run,all these add up to massive costs being saved therefore we can offer cheaper services for the UK.

Interesting isnt it how we came 11th best share performer in 2002 and youve never heared of them..Obviously no distributors in your area..If you would like more info then e-mail me as i dont want to put a link on this message and risk getting thrown off the site..As i do believe its not allowed..

mark@utilitiesplus.info

Mark,

You might be better starting your own TEP Thread rather than posting on another company's thread.

Macro market still seems bullish so smaller Telecoms should get a lift I feel.

Cheers

Ash

Should we all strap in?

regards

Come on Ash rally the troops ;-)

Boardmate,

We have a 12.50% rise on a significant->50m On Balance Volume.Who needs to?We have broken out above previous resistance on the start of a nice healthy wave 1 IMHO.

FTSE Closing on another rally, small pullback on RED from plus 12.50% to plus 7.90%, they always say Buy the first pullback on a rally.

Still look crap to me Ash , have a look at PHTM with your charty indicators and let me know what you think when you have a minute.

Cheers

DIL,

Yes well will look, right now RED indeed looking crap down 10.50% no idea why!

Morning all,

Some intersting trades going through and the price ticking up, is something in the off?

Looking forward to the results.

Yes something big is in the off. Skidmarks over on ADVFN is talking about a possible takeover by Telewest and another 10m big buy today like yesterdays after close.

AS,

Well I have thought for some time RED is as cheap as old boots, especially bearing in mind cash per share, turnover per share and gross margins.

No real surprise to see RED as a takeover target under the circumstances.

Worth noting UKX turned today at 3711.50 ie 61.80% Fibo Retracement of yesterdays close 3793.30 area and low of 3660.90. 132.40 points x 61.80%=81.80 from 3793.30=3711.50 DJIA in a very nice uptrend at moments looks good for market tomorrow.




RED looks pretty bullish IMHO a cup and handle type formation moves on larger volume bodes well for the morning I think especially when the stock breaks above 0.51p mid.

Ashley

Do you think there could be any truth to an offer coming for the company as mentioned on another BB? Could be interesting.

Buddy,

No idea to be honest, what I do know is that the chart is producing a bullish inverted H & S type signature.

We might see pullback to 0.465p/0.475p mid, but overall to me looks oversold on 15 minute/

Looks like pullback completed RSI on the floor

Afternoon all,

Looks like RED has bottomed here short term, Bollinger bands tightening, and still reasonable volume ->4.25m

Probably a good long entry IMHO.