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Daily ShareChat: Rakon

By Jenny Ruth

Tuesday 31st May 2011

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 Jenny Ruth

Rakon's adjusted net profit of $8.1 million for the year ended March was well below his $12.4 million estimate, primarily due to weakness in the New Zealand business earnings, says Jason Familton, an analyst at First NZ Capital.

He has cut his forecast for earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending March 2012 to $28.4 million from $28.6 million previously on the back of the result and reduced his 12-month share price target to $1.45 from $1.50 previously.

"Rakon continues to have significant growth opportunities ahead of itself, in particular in the smart wireless device and telecommunications infrastructure markets, with further evidence in the full-year 2011 result that Rakon is starting to take advantage of those opportunities," Familton says.

"However, while the relative strength in the New Zealand dollar remains, we anticipate the significantly improving underlying business performance to be somewhat masked," he says.

"As always, the investment performance in Rakon depends on both its underlying business but also the performance of the New Zealand dollar."

The successful start-up of Rakon's Chinese manufacturing facility in July and any depreciation in the currency would be clear positive catalysts for the stock, he says.


Rating: Outperform.

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