18th October 2007 : Leadcom voted "AIM International Company of the Year for 2007"




Main Web Site : http://www.leadcom-is.com/

Investor Relations Email : investorsinfo@leadcom-is.com

Good to see the buy ratings- especially those of us who are long on this stock!

LEAD stilll going strong coeliac1 :)

Yes even in this morning's weak market too.

No real visible volume too, good signs.

I see the order book for this year is 70% of the 2005 actual so there is quite a lot of potential for yet further upgrades on any sort of new order announcements. I also like the look of prospects for increasing orders for service management from existing sources which will give a firm base for the future.

Yes coelic1, a very good chance of a few decent upgrades to come.

Still looking strong, we should be in the high 70's soon.

True PP, but you really should get some sleep at nights my friend!

coeliac1 I am out of the country now, so time zone for me is fine, but I hate dial up internet... !!



Thanks to macansy at AFN :

Excerpts and highlights from that 45 page Altium note ;-)

Investment Case

"A number of demand-driven factors... suggest that the demand for telecom infrastructure services in emerging markets will continue to grow at 30%-40% for forseeable future... the short to medium term demand backdrop for Leadcom looks extremely healthy."

"Several conversations with a number of Leadcom's partners in Latin America reveal that there is no other services provider with a similar level of technical expertise, experience, flexibility and geographical reach in the region..."

"The company has established itself as default choice for its partners in Latin America and Africa and as a result is often awarded large projects without having to go through a competitive tender... a number of Leadcom's partners are already screaming out for the firm to expand into new territories where they have operations or opportunities..."

"Still significant potential for expansion of its geographical footprint... plenty of growth potential in new markets such as India, Central Asia and even the U.S... As well as expanding geographically, Leadcom has recently started working with new equipment vendors such as Siemens and Huawei..."

"The growth prospects for Leadcom in the short and medium term may be even better than over the past few years..."

"We are confident that further, possibly material, upgrades will follow in the next few months.."

"Possible outturn for the year of $161.2m, compared with our forecast of $130.6m - reinforces our view that our estimates for the year are likely to prove conservative..."

"expect trend of margin expansion to continue though due to rising option expenses expect a small decline in operating margin in 2006..."

"free cash flow is expected to expand to $9.6m by FY2008E. We forecast net cash of $13m in Dec 2008..."

"Leadcom trades at a significant discount to the wider market and to the telcoms and technology sector... we believe the discount is unwarranted... prospect of 27% earnings growth over the next few years should persuade investors that the stock should continue its upwards rerating... we expect potentially material earnings upgrades over the next few months to provide further catalysts, if required, for continued outperformance."

Potential investor concerns

Altium comment on potential investor concerns and advise that the worry about continued growth at the same historical rate is not a concern - they forecast CAGR to continue at approx 30% for the next three years compared to 50% over the last three years -however it is stressed that this is a very conservative forecast and doesn't take into account any material upgrades.

They stress that more of a concern is Leadcom's ability to manage this growth whilst maintaning margins and quality of service etc - Altium conclude that they do not see this as a problem due to the quality of management and measures/strategies being put into place to manage these issues.

Altium also stress for various reasons that they see little geographical/geo-political risk (mainly due to LEAD's non-reliance on any one particular region) although they do point out that certain countries, principally in the Middle-East and North Africa, will effectively be off-limits to Leadcom in the present political climate.

Currency risk is minimised by dealing in US$, credit risk with emerging market customers is neutralised by gaining a letter of credit from any customer deemed to have questionable creditworthiness.

It is also pointed out that, in general, new Israeli tech IPO's have disappointed but that LEAD has been the best performing of all the Israeli tech AIM entrants over the past year...

The trend for LEAD's partners to continue to outsource is set to carry on and a "return to the days of armies of employees integrating their own network equipment are long gone.."

Comment is also made on LEAD's reliance on Nokia for revenues (accounting for just under 50% of 2005) and advises that as business (partners) and market share grows, so will the reliance on Nokia lessen, however Nokia is the major player in this field, having a very close relationship with LEAD and that they are likely to remain Nokia's number one partner for some time...

LEAD's principal partners Nokia, Ericsson and Nortel etc are coming under attack from low cost Chinese providers such as Huawei and ZTE but LEAD have already executed some contracts for Huawei and are in negotiations with ZTE on others and as such this is unlikely to have an unduly adverse effect - LEAD is well placed with both established and emerging solution providers...


Valuation

"We have constructed a discounted cash flow model in order to provide a sanity check and in order to estimate the underlying value of the business on a medium term view. As usual, our assumptions are highly conservative, both in terms of revenue growth and operating margin and terminal growth rate and beta. Using a discount rate of 10.4%, our DCF model suggests a fair value of 116p"

Growth Drivers

"Although at first sight it may seem difficult for Leadcom to maintain its revenue growth of the past few years, we believe that, if anything, growth could accelerate in the short to medium term. In simplistic terms, the market for telecom services in emerging markets is also growing rapidly..."

Acquisitions

"Thus far, Leadcom's growth has been entirely organic. However, management has said that it would not be averse to looking at selective acquisitions in the future in order to gain a footprint in new territories or to deepen its knowledge base in a particular technology. We are of the opinion that there is more than enough expansion potential for Leadcom to continue to grow organically and that the company has shown itself to be highly effective at setting up operations in a new country very rapidly on its own..."

"Leadcom's $135m revenues is such a small percentage of the $800bn global telecoms services market that continuing to win market share, as it has been for the last few years, should actually not prove all that challenging..."

Competitors

Altium list Leadcom's principal competitors as Alan Dick, Bovis Land Lease, LCC International, Lemcon Networks, Lucent Worldwide Services, Mycom, Pryscom and Relacom. They then go on to say that few of them can match Leadcom's combination of wide geographical presence and extensive portfolio of technology solutions and that they expect Leadcom to continue winning market share from them...

Scenario Analysis - summary

"Leadcom has consistently demonstrated its ability to outstrip, often by a not inconsiderable margin, its own and market forecasts. Having spent some time with management on the subject of the company's interal forecasting methodolgy and also with partners discussing their plans for 2006, we are confident that our revenue estimates represent something of a worst case scenario.

In our view, therefore, Leadcom should be able to achieve our 2006E forecasts based on the current order book and pipeline with some comfort. This effectively assumes that the group wins no further new contracts of any significance for the rest of the year. Given the historical win rates and frequency of contract announcement, this is highly unlikely..."

Finished blue after some sell volume today, which is a good sign.

The broker report is as good as it gets and we can be optimistic for continued progress on all fronts.

Short term I would expect downward pressure due to time of year, but not for too long with a trading update due on the 31st of March.

Not sure I am convinced the placing and directors sales are a good thing.

If this is a growth story why all the heavy selling, sums it up here...

Home > News & Comment
Leadcom directors cash in
Companies: LEAD
09/03/2006
Founding shareholders and directors of Israeli telecoms service provider Leadcom Integrated Solutions have sold heavily in a 34 million placing.

The placing at 73p, handled by Altium Securities and Corporate Synergy, represents 46 per cent of fast-growing Leadcom's share capital and has brought in considerably more than was raised for the company itself in its AIM float last April. Selling shareholders and directors are showing profits of more than 128 per cent over the 32p float price.

Elgadcom, Leadcom's former parent company, has sold 2.4 million shares and no longer has any stake. Moshe Shushan, who is both chairman of Leadcom and a director of Elgadcom, has sold his entire holding of 9.8 million shares for 7.1 million.

Chief executive officer Ari Alcalay has sold 1.3 million shares and kept 1.3 million, as well as 2.7 million options. Finance director Eytan Mucznik has sold 355,000 shares and kept 249,900, plus 605,200 options.

Leadcom spokesmen say the placing, including shareholders' and directors' sales, was prompted by demand from institutional investors and management, though such hefty disposals so soon after floating might not inspire confidence everywhere. The company increased pre-tax profits a hefty 263 per cent to 6.2 million last year on turnover up 47 per cent to 57 million.

This morning, Leadcom shares eased 0.25p to 73p, valuing the company at 72.3 million.

Robert Tyerman

The same thing happened with the directors sells last year at 52p to satisfy instituional demand, the price then went sideways for some time as people hit the panic button of not understanding LEAD and now is at 73p and the same happens again.

First, this is a young and driven management team, they are taking their rewards as they go along, as would I. You work for money, if your bonus is shares and an institution wants to buy your shares in an orderly fashion, then I would let them, you will get some more in the next round of bonuses.

Interest in this share is going up, some have sold, and some will be hoping for a drop now so they can buy back in lower.

Its April, a lot of people are going to cash, and will want to reinvest this in decent companies at the cheapest price they can get in April/May.

They are delivering growth with the extra mony, and that is the end result that is needed, and all that is needed.

Extract from the IC aritcle on LEAD earlier this month ( http://www.investorschronicle.co.uk )


Israeli telecoms provider Leadcom joined Aim in April 2005 and says the flotation helped generate business. This is reflected in its pipeline of new work which, at $280m, has more than doubled since the float. The rapidly growing company operates in Europe, South America and Africa, and has partnerships with Ericsson, Siemens and Nokia.

Last year, Leadcom won a handful of new contracts in Tanzania, Uganda, and Guatemala. It's also targeting further countries in these regions, as well as gaining a foothold in Asia Pacific and the US. Revenues in the Americas, Europe, Middle East and Africa grew by 86 per cent, boosted by technology upgrades and the expansion of capacity.

Leadcom, which for the third year running grew sales by more than 45 per cent, boasts a record order book, and has almost $70m of turnover in the bag for 2006. Good value.

Trading update on 31st March, and should be big news for March/April :)

Altium 27th Feb 2006 Research Report now available.

http://www.leadcom-is.com/admin/literatureSubCat/Filesdownload/Altium_fullnote_27feb06.pdf

A nice introduction at the front of the aforementioned Altium report (and get ready for some upgrades to that price target coming soon I think) :


Leading from the front

Leadcoms prelims on 23 February continued the groups track record over
the past few years of exceptional revenue growth (+47%), operating margin
expansion (11.7% vs. 6.6%) and enhanced competitive position. Secured
orders of approximately $70m and a pipeline of $280m suggest that our FY
2006E forecasts of $130m are conservative. Furthermore, an expanded
network of partners, a broader geographical base and aggressive rollout
plans by emerging market network operators all bode well for Leadcoms
short to medium term growth prospects. We believe the current rating of
15.3x 2006E EPS, falling to 10.7x for 2007E, does not reflect Leadcoms
exceptional growth potential (we estimate 27% CAGR in EPS to 2008E). Our
price target of 90p (based on 10x 2006E EBITDA) represents upside of 29%.

And this bit is one of the major points :)

Our price target of 90p is based on 10x 2006E EV/EBITDA and is supported by a DCF-derived fair value of 116p. We believe that further contract wins over the next few months should give rise to potentially material earnings upgrades which should in turn provide the catalyst for a rerating.

Solid end to the day, roll on the trading update end of this month.