Gamble of the week telecom co with strong Middle East presence – MoneyWeek

Norconslargestclientandoneofitslongest-standingcustomersisthegovernment-controlledSaudiTelecomCompany(STC)。

InOctober2007,thefirmresigneditstwo-yearmasterserviceagreement,thussecuringgoodearningsvisibilityoverthenext12months。

Asanindicationofitsbuoyancy,consultantutilisationlevelsarerunningatnearly95%。

Thatsaid,theboardrecognisesthedangersofthegroupsexposuretoasingleaccountandisactivelydiversifyingitspresenceintootherterritoriesandbusinesslines,especiallyintheMiddleEastandSoutheastAsia,andacrosstheITanddefensesectors。

Withregardtothefigures,housebrokerFinncapisforecasting2008salesandunderlyingEPSof$66。

2mand18。

2centsrespectively,risingto$76。

2mand20。

3centsin2009,whilealsopayingaprospective4%dividendyield。

Assuch,thesharestradeonfrugalp/eratiosof7。

5and6。

7forthenexttwoyears,whilethecompanypossessesasolidbalancesheetwithnetdebtofonly$2m,evenafterdeducting$5mofemployeepensionliabilities。

Second-halfcashflowisexpectedtobeahealthy$3。

9m。

However,alongwithitsrelianceonSTC,Norconisexposedtorisinginflation,geo-politicalriskandforeignexchangefluctuations,sincemostoftherevenuesaredenominatedindollar-peggedcurrencies。

Also,thesharesarethinlytraded,withonlya5。

5%float,soifyouwishtobuysomestockthenIdadvisebidingyourtimeandsteadilydripfeedinganypurchasesoveranextendedperiod。

Allthesame,thistelecomsservicesminnowisacheap,rapidly-expandingstockforthemoreadventurousinvestor。

Recommendation:speculativeBUYat74。

5p(marketcap£31m)



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