Daily ShareChat: Rakon

The pricing of Rakon's share purchase plan (SPP) is "a compelling entry point for investors," says First NZ Capital analyst Jason Familton.

The company's $45 million placement to institutional investors was underwritten at $1.10 a share but was placed at $1.15. The $20 million SPP price will be the lower of $1.15 or 2.5% below the average end-of-day market price of Rakon shares during the five business days ending September 29.

Rakon's last institutional placement and SPP in February 2007 was priced at $4.05 a share.

Familton says the company's decision to proceed with building a factory in Chengdu in China, previously postponed due to the global financial crisis, "is a key indicator for the company's own confidence around its participation in the GPS-into-Smartphone market which is likely to be the key earnings and value driver over the medium term."

Nevertheless, the company's guidance that it expects to report a first half EBITDA (earnings before interest, tax, depreciation and amortisation) loss between $3 million and $4 million is "disappointing," Familton says.

"While second-half earnings are anticipated to improve considerably, we will continue to monitor crystal export volumes closely for evidence of the recovery in volumes, in line with the company's guidance."

He cut his valuation of Rakon shares to $1.48 from $1.58 previously to reflect the dilutionary impact of the capital raising.

BROKER CALL: First NZ Capital rate Rakon (NZX: RAK ) as outperform.

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