Upgrade lifts Rakon share price

Rakon’s share price has jumped higher after the company upgraded its earnings guidance for its 2021 financial year.

The company, which makes components for the telecommunications sector, said it expected to achieve underlying earnings before interest, tax, depreciation and amortisation of between $20 million and $22m for the year to March 31, up from its previous guidance of $16m to $18m.

Rakon’s shares closed up 3c at 79c yesterday on the NZX.

Anand Rambhai, Rakon chief financial officer, said demand from the telecommunications sector had been higher than expected.

“Globally, the roll-out of 5G networks is continuing, resulting in greater demand for Rakon products. There is also greater demand for Rakon products for synchronising data centres and enhancing optical communications reflecting growth in global data volumes and cloud-based applications.”

Rambhai said an October fire at Asahei Kasei Microdevices in Japan, the world’s largest semiconductor manufacturer of TCXO Integrated Circuits (IC), had created a worldwide shortage of TCXOs, which were used in a wide variety of applications.

“Rakon is meeting some of this shortfall due to its good inventory levels, agile manufacturing operations and its proprietary TCXO IC, resulting in higher revenue forecast for Q4 FY2021 [quarter four of its 2021 financial year].”

Rambhai said the factors underpinning Rakon’s good performance were expected to continue, particularly around the deployment of 5G.

But he said the guidance was dependent on the management of the usual supply chain and operational risks as well as risks arising from the Covid-19 pandemic and geopolitical issues for Rakon’s operations and those of its customers and suppliers.

Rakon shares have rallied strongly in recent weeks and on January 8 the company received a please explain notice from the stock exchange.

At the time it said it continued to comply with the NZX’s disclosure requirements.

Rakon’s revenue in the first half to September 30 improved to $59.5m from $56.9m in the previous corresponding period, while its net profit came to $4.6m from $1.3m.

The company designs and makes advanced frequency control and timing solutions.

Its three core markets are telecommunications, global positioning and space and defence.

Rakon’s shares have risen more than 165 per cent in the last year.