Daily ShareChat: Rakon

Rakon's first-half $2.9 million operating loss was slightly better than expected, says Goldman Sachs JB Were analyst Tristan Joll.

"While this result serves as a useful checkpoint that Rakon's outlook has not changed in the last seven weeks, we remain focussed on the shoring up of Auckland volumes and margins as the primary driver of sentiment around the stock," Joll says.

The result showed the Auckland operations suffered margin pressure, partly offset by and improving mix and margins in Britain for the crystal timing devices manufacturer.

"We view the tone of management as cautiously optimistic that demand is returning in most end markets and that growth opportunities are panning out largely as presented during the company's capital raising," he says. Rakon raised $66.1 million through an institutional placement and a share purchase plan last month.

The commoditisation of Rakon's TCXO crystals underlines the longer-term importance of the company's development in Chengdu, China, Joll says. The capital raising was partly to finance building a factory in Chengdu.

Given that, it was no real surprise the company maintained its previous guidance that opearting earnings for the year ending March 2010 will be between $4 million and $8 million. Concensus forecasts are for $6.4 million but Joll's forecast is just $5.1 million.

BROKER CALL:  Goldman Sachs JB Were rate Rakon as hold.

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