By Jenny Ruth
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Monday 29th June 2009 |
Text too small? |
Recent news flow suggests deteriorating market conditions have started to stabilise for quartz crystals company Rakon, says Dennis Lee at ABN Amro Craigs.
"We have seen companies such as Texas Instruments and QualComm increasing their earnings guidance and analysts upgrading their forecasts on (BlackBerry manufacturer) RIM," Lee says.
Some of this recovery has been driven by Chinese mobile phone carriers upgrading their networks to 3G technology.
"However, Rakon is more cautious about the near term, attributing the recent sharp pick-up in new orders more to customers restocking," he says.
"Management remains confident that its business plans will deliver strong results in the medium term."
In the meantime, Rakon is focusing on growing its market share by capitalising on its technology and market leadership.
Lee says he won't be surprised if Rakon wins a major contract in the second half of 2010, although he doesn't include this possibility in his forecasts. He estimates a supply contract for 10 million units of the company's TXCO product could add about $3 million to operating earnings (earnings before interest, tax depreciation and amortisation or EBIDA).
Lee is forecasting EBITDA will rise from $18.3 million in the year ended March to $26 million in 2010 and $29.6 million in 2011.
BROKER CALL: ABN Amro Craigs rate Rakon (NZX: RAK ) as hold.
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