Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

LEADCOM: We had our concerns - stick to good old Vodafone for your emerging market telco exposure!

A quick recap from our Small Cap Review from 9th August 2007

Booming top line and worrying cash flow-I’ll stick with good old Vodafone for my emerging market telco exposure

Revenue growth is great and they are operating in booming growth markets (probably a bit too adventurous for some!) but the cash flow and horrendous debtor build up isn’t to my liking at all. I think I would prefer to get emerging market telco exposure through something like good old Vodafone. It might not look as exciting or seemingly have the same growth potential but surely through taking a position with a CFD or spread I could conceivably achieve the same return on capital without the liquidity and location riskBargain assessment – valuation looks cheap but the cash model means it isn’t one for me!

Today's news hardly came as a surprise…

Leadcom a leading international provider of innovative telecommunication solutions, informs that, with the exception of the Caribbean and Latin America (CALA) region and a significant rise (not a good start) in the Company's financial expenses, the group has
traded in line with the board's expectations.

Revenues for the nine months ended 30 September 2007 exceeded US$149 million.

Apart from the CALA region, the Company's growth in revenues has been translated to the expected operating profitability. But what about the cash flow?

In the year to date, the engagements with a major customer in the CALA region, a leading telecommunications equipment vendor have contributed extremely low profitability levels (compared to other engagements in the region and to the company's standard).
This business sector is now expected to be treated as discontinued, a nice massaging of the old numbers!

Despite the operational challenges in CALA, Leadcom's Group cash flow in Q3 2007 apparently continues to be on track - I just wonder what kind of track!

The Company expects significant rise in financial expenses in relation to its private issue of Bonds to the Israeli market, in December 2006. You also have some US dollar exchange worries added to the mix as well.

My view remains as previously, that I would prefer to get emerging market telco exposure through something like good old Vodafone, whose shares have, by coincidence, risen 20% over the same period!


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