More bad timing at Intellect

The primary reasons for the decline are delays in the rollout of national smart-card platforms in Germany and the UK. Germany in particular was to be the main driver of sales growth during the current fiscal year. This will negate a large proportion of growth in previously assumed sales and is likely to result in a loss being reported for the year to June 30,1998 - something the market will not like.

A positive note

After spending more than $25m over the last 3 years on developing a comprehensive product set for secure electronic payments in the e-commerce industry, focus will now be directed towards generating revenue with a declining R&D spend.

The company has recently secured its first sales in Japan to supply a closed community smart card based loyalty system to merchants throughout Tokamachi City. Intellect Electronics Japan has also been established as a joint venture company with a local telecommunication equipment manufacturer to capitalise on the growing trend towards smart card and electronic commerce in Japan. There is also increasing merger and acquisition activity happening throughout the industry and at these lower prices Intellect must be looking attractive to some of the larger players.

While the above mentioned delays are disappointing and at the very least are likely to cap any near term share price appreciation, we still favour Intellect's chances of eventually bringing home the bacon. We retain our SPECULATIVE BUY recommendation for patient investors unafraid of risk.