Rakon jumps as company rides global component shortage

After years of a lacklustre share price performance, the fortunes of electronic componentry maker Rakon appear to be turning.

Rakon’s share price jumped 13 per cent to 87c on Friday morning after the firm announced a wave of new orders would boost its 2022 revenue. By midday it had eased slightly to 84c.

The stock was already on the rise, with the NZX’s regulator issuing a ”please explain” after the stock rose 21 per cent, from 61c to 74c, in one day in early January.

Rakon replied at the time that it continued to comply with the disclosure rules, which require all shareholders to be briefed on material information.

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Ten days later, the company flagged that it was expecting improved pre-tax underlying earnings of between $20 million and $22m for the current year to March, compared to previous guidance of $16m to $18m.

Now Rakon has advised it has secured several significant orders from new and existing customers including a ”material order from a new multi-national customer”.

The orders would be delivered over the next two financial years, and were expected to increase its revenue next year by at least 20 per cent on the current financial year.

Rakon makes advanced frequency control and timing solutions for the telecommunications, global positioning and space and defence industries.

The company has benefited both from the ongoing rollout of 5G telecommunication networks and from a fire at Japan’s Asahei Kasei Microdevices, the world’s largest semi-conductor maker of TCXO integrated circuits, last October.

The fire created a global TCXO circuitry shortage, and to deliver the volumes which the new orders required, Rakon said it would have to increase capacity at its New Zealand headquarters.

It would have to source more materials, hire extra technicians, operators and engineers, and invest in more manufacturing and testing equipment.

Hamilton, Hindin, Green investment analyst Grant Davies said Rakon had listed in 2006 at $1.60 and by 2007 it was ‘’a star of the NZX’’ with a share price of $5.80.

But its fortunes changed during the global financial crisis when the market for crystal oscillators changed.

‘’So they had to reinvent themselves. It’s taken a long time to get some momentum again but it looks like they’re building some now.’’

In January, Rakon said that 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.”

Downside risks included the management of its supply chain, the effects of the ongoing Covid-19 pandemic and geopolitical issues for bot Rakon’s operations and its customers and suppliers.