Rakon's startup Thinxtra won't be a drag on earnings for long says chairman

Thursday 17th August 2017

Rakon's start-up investment Thinxtra won't be a drag on the NZX-listed components maker's earnings for long, according to chairman Bryan Mogridge.

Earlier this week, Rakon predicted a return to profit in the year ending March 31, 2018, with underlying earnings before interest, tax, depreciation and amortisation of between $9 million and $11 million. At today's annual meeting, Mogridge told shareholders that result includes an estimated $2 million loss from Thinxtra, a company that is building Internet of Things, or IoT, networks using Sigfox technology. According to Thinxtra, Sigfox has built a global network to connect billions of devices to the internet while consuming as little energy as possible.

Mogridge said Thinxtra is in the final states of its series B, and likely, last capital raising. This round is raising A$20 million and a "significant Australian government institutional investor" is in the final stages of signing to take A$10 million.

The post money value of Thinxtra when the round closes will be A$66.2 million and Rakon will own 23 percent of the equity. This will value Rakon’s shareholding in Thinxtra at 2.6 times what it paid at around A$15.50 per share. Rakon holds 984,000 shares. Rakon initially invested A$800,000 for an 11.4 percent stake in late 2015, which it lifted to 18.1 percent in early 2016.

Mogridge also said that Thinxtra is already providing very useful information about the IoT space and will offer Rakon inside knowledge that not only lets it understand the Sigfox network system that Thinxtra uses, but also the competing networks of LORA and NB-IoT. Rakon can build modules for all three IoT networks on a global basis, he said.

He noted those other networks are beginning to arrive in Thinxtra's areas of Hong Kong, Australia and New Zealand bringing competition but also an uplift in market opportunity.

"We see sufficient room in the growing and very large market for all the main participants to earn a reasonable return on their investments," he said.

According to Mogridge, Thinxtra has 1.8 million committed connections for the network providing committed revenue of close to A$20 million over the next 8 years. Within its sales pipeline Thinxtra has just over 50 million anticipated connections across Australia and New Zealand which should generate around A$300 million in revenue over the next 8 years.

Regarding Rakon's current financial year, Mogridge said revenue and underlying ebitda have improved in the year to date and there has been a good uptake of new products with higher margins from New Zealand.

Rakon shares were last down 2.2 percent at 22.5 cents, having gained 4.6 percent so far this year.

(BusinessDesk)

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