Rakon shares at record low in face of high kiwi, increased rivalry

Thursday 8th December 2011 10 Comments

Shares of Rakon have sunk to a record low on concern increased competition and the strength of the New Zealand dollar are eroding its ability to lift earnings, prompting brokers to warn their clients to “steer clear”.

Rakon, the crystal timing devices manufacturer, last traded at 45 cents, the lowest since the stock was sold in a heavily oversubscribed initial public offering in May 2006 at $1.60 apiece. Its market valued has about halved to $86 million.

The New Zealand dollar has gained 21 percent since Rakon’s IPO, when its cutting-edge technology attracted defence manufacturers and mobile phone makers. Last month Rakon posted a $3.5 million first-half loss and managing director Brent Robinson said a challenging global economic environment had sapped demand from customers.

“The world was in a different place when they first listed,” said Mike Lister, head of private wealth at Craigs Investment Partners. “The technology doesn’t stay your own for very long.” This has translated into a “steer clear” approach amongst investors.

Craigs advised its clients to exit Rakon in September, when the shares were at 73 cents and Lister said it would be “reasonably brave to invest” in the stock now.

Rakon is rated a ‘hold’ based on the consensus of five recommendations compiled by Reuters.

Rakon has scotched reports it needs to raise capital to strengthen its balance sheet. Lister said the company is anticipating increased earnings in the second-half from its Chinese manufacturing plant.

Last month, Robinson reaffirmed previous guidance for full-year earnings before interest, tax, depreciation and amortisation of between $14 million and $18 million.(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 8 December 2011 at 12:58 pm Duncan said:

So a good long term buy then

On 8 December 2011 at 3:52 pm paul said:

funny how they had a sell on the stock when my guy from the same company was buying them for me....

On 8 December 2011 at 5:27 pm Gerald said:

What Craigs say in public for free, and do for paying clients in private may be very different indeed. I'd take the free public comments with a grain of salt.

On 8 December 2011 at 6:31 pm Doug said:

I'd take the the comments of all the brobers whether private or public with a grain of salt. Make your own judgement!

On 8 December 2011 at 7:33 pm paul said:

so Gerald you would buy here?

On 9 December 2011 at 9:52 am dave said:

it seems the likes of craigs are short sighted in which they seem to gamble with on short term gains and losses, shares are long term investment. no where has craigs has mentioned the impact rakons the new chinese plant will have on profitablity and the postive impact it will have to fight exchange rate fluctuations.

On 9 December 2011 at 11:35 am Gerald said:

Probably a good time to get your dollar-cost ave down for long-termers Paul... I'd say the Private Equity folk are sniffing around now..

On 9 December 2011 at 4:50 pm Bernie said:

Rakon have never paid a dividend and it will take a long time, if ever, for shareholders to get any form of reward from the company so I agree with Craigs.

On 9 December 2011 at 5:13 pm paul said:

anyone who calls it a sell when it has already dropped 50cents sure is on the leading edge of calling stocks. What about calling it at the top. Only then could you claim some credit.

On 10 December 2011 at 10:45 am Gerald said:

They'll be swallowed up long before that so that's where you'll make or lose as the case may be.