Daily ShareChat: Rakon

Rakon's reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $24.8 million for the year ended March was below its own guidance of between $25 million and $30 million but towards the top end of analysts' expectations of between $17.9 million and $25.9 million, says Tristan Joll, an analyst at Goldman Sachs & Partners.

"We believe the most important aspect of the result was that it reflected a demand-led recovery from a tough full-year 2010," Joll says.

"Rakon highlighted growth across all key markets, in particular wireless devices and telco infrastructure."

The fourth "Tier One" phone manufacturer Rakon has sealed a relationship with is likely to be Sony Ericsson or Nokia, Joll says. "The company also highlighted it is now included in designs for eight tablet devices."

Product development remains Rakon's priority while capacity is growing at its Chengdu factory opening July 11 and at its joint ventures - its Indian JV doubled its capacity in the latest year and will do so again by September, Joll says.

"We believe Rakon is exposed to growth markets and expect its operational diversity to benefit margins in full-year 2012 in spite of currency dynamics." Joll is forecasting net profit of $14.6 million for the current year, up from $8.5 million in the year just gone.

Recommendation: Buy.

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