MICC:
This is not a typical short pick for SI. It is not a fraud. But it is outrageously valued with, in my opinion, a fundamentally flawed business plan.
MICC is in the business of providing cellular service to Third-World countries. The idea is that there is insufficient hard-wire infrastructure in these countries, and that cellular is the only choice in some areas.
This contention is true. However, the problem is that there is insufficient per capita income (or more precisely, insufficient number of high per capita income users per square mile) to support a cellular infrastructure.
The company seems to be making money. But, if you look more closely at the numbers, the only money they are making is from disposition of assets.
The company goes out of its way to avoid publishing EPS or cash flow numbers in their press releases. Instead, they trumpet their increase in subscribers (check the user rates), huge increase in "potential" subscribers (not hard in India), and their growing EBITDA. The problem is that they have massive (and increasing) interest payments and the need to invest heavily in order to maintain the business. They do not publish quarterly cash flow numbers, but you can work into them, and they are not pretty.
In short, unless they sell some more assets soon, the company is going to go from profitable to dramatically unprofitable this year. |
