RAK-Rakon

[Shareguy]

FB latest note.  Future looks bright. A record year.

Rakon Limited (RAK) reported its most profitable year (in its fifty year history) over FY22, with underlying EBITDA of NZ$54.4m +132%, on revenue of NZ$172m +34%. With RAK flexing its local manufacturing base and avoiding supply chain issues, it was able to reap the benefits of global industry shortages. The result was above management's guidance range of NZ$49m–NZ$53m and ahead of our NZ$51m underlying EBITDA estimate. Management's comments about the strength in underlying core markets provides confidence for the future. Given current capacity constraints, RAK awaits the completion of its new Indian manufacturing facility to take advantage of strong demand. The Board refreshed RAK's ESG policies with a framework disclosed. WACC adjustments, given higher interest rates, and higher costs see our spot valuation falling 9% to NZ$2.09.

[LoungeLizard]

FB latest note.  Future looks bright. A record year.

Rakon Limited (RAK) reported its most profitable year (in its fifty year history) over FY22, with underlying EBITDA of NZ$54.4m +132%, on revenue of NZ$172m +34%. With RAK flexing its local manufacturing base and avoiding supply chain issues, it was able to reap the benefits of global industry shortages. The result was above management's guidance range of NZ$49m–NZ$53m and ahead of our NZ$51m underlying EBITDA estimate. Management's comments about the strength in underlying core markets provides confidence for the future. Given current capacity constraints, RAK awaits the completion of its new Indian manufacturing facility to take advantage of strong demand. The Board refreshed RAK's ESG policies with a framework disclosed. WACC adjustments, given higher interest rates, and higher costs see our spot valuation falling 9% to NZ$2.09.

Agreed that RAK is in a sweet spot at the moment - supply shortages, pent up demand, expanding core markets. It is probably a good buy at current price of $1.27 - something like 30% off the 200 day moving average and 50% off recent highs.
I would still have liked to have seen RAK commence a divy this year, on the back of a pretty impressive result. It didn't pay even 2-3c which it could have easily afforded nor did it quantify when it would start paying.
I know some would maintain it is not a dividend stock -  but in that case it is going to continue to stay in the doldrums for quite some time along with other pure growth stocks. Yield stocks will continue to do better as a hedge against what seems to be embedded inflation. Even if RAK arrests the decline in it's SP - and there are signs it has bottomed out - shareholders are still losing 7-8% in real terms after inflation.
A nod from the company - by way of a small divy - would have shored up the SP. More than that RAK has a history of promising, but never delivering, dividends to shareholders, even when it's results indicate that it could. Hopefully this year they will break with the past and start paying regular dividends. 

[Shareguy]

Trading at low multiples. Market still sceptical with the result. And yes I have no doubt that a number of investors were pretty disappointed with no dividend after dangling the carrot. New CEO needs to get some good runs on the board. I have a free carry position that I will add too if it continues much lower.

[Shareguy]

Rak agm this Thursday. Hopefully an update on how the year is tracking.

[Left Field]

Forecast for FY23 not quite as rosy as FY22.

https://www.nzx.com/announcements/396762

Rakon (NZX: RAK), an international leader in frequency control and timing solutions today announces it expects Underlying EBITDA1 for the year to 31 March 2023, to range between $36 million and $44 million. Even at the bottom of this range, the result would represent the second-best ever reported by the company.

The guidance is consistent with market expectations and comes ahead of the company's Annual Meeting of Shareholders in Auckland today. It compares to the record $54.4 million Underlying EBITDA achieved in the 2022 financial year, a result lifted by the short-term opportunities created by a global chip shortage that followed a fire at one of the world's largest chip manufacturers.

[winner (n)]

2nd best year ever leftie so pretty good

And an inflection point ....that's good ........ better than a crisis

[LoungeLizard]

As far as I am concerned the inflection point will be when the company is confident enough in its growth strategy to start paying a dividend.

[Left Field]

I guess an approx 25% projected revenue drop was baked into expectations as SP up so far today.

Maybe it's Winner's inflection point thingy that they like. Onwards and upwards from here.

[Shareguy]

Looked like a upbeat AGM. Full year 23 guidance slightly up. Dividends gone due to huge opportunities in America with potential acquisition.

Inflection point mentioned. I guess we'll wait and see.

[Left Field]

Looked like a upbeat AGM. Full year 23 guidance slightly up. Dividends gone due to huge opportunities in America with potential acquisition.
Inflection point mentioned. I guess we'll wait and see.

This chart from their presentation highlights the 'one-off' nature of FY22's gains and shows more realistic aspirations for FY23. I'm guessing they have left themselves some 'wriggle room' for upgrades etc.

I Like their emphasis on "repositioning from commoditised consumer markets into growing higher margin industrial markets". Current PE around 10.8 so I guess RAK is a 'hold'.

[Shareguy]

I think it's a hold. The future does look bright with what's been going on in the world. Not a growth company or is it going to be finally.

[BlackPeter]

I think it's a hold. The future does look bright with what's been going on in the world. Not a growth company or is it going to be finally.

Well, technically they are in a confirmed downtrend (SP is since May 22 below MA200 and the cross of death was June 8th), and I guess looking into their history, Rakon is much more experienced in disappointing shareholders than in providing pleasant surprises for them. I understand as well that the outlook is not really flash, isn't it?

I would not call this a "hold", but each to their own ...

[Shareguy]

Well, technically they are in a confirmed downtrend (SP is since May 22 below MA200 and the cross of death was June 8th), and I guess looking into their history, Rakon is much more experienced in disappointing shareholders than in providing pleasant surprises for them. I understand as well that the outlook is not really flash, isn't it?

I would not call this a "hold", but each to their own ...

Yes no question the history with this company has not been good. The new CEO seems impressive and he's just done the rounds of the brokers who also seem impressed with him.

I Think given the chip shortage and Americas decision to produce more chips at home it makes sense for Rakon to set something up in America or do a joint-venture. If they don't stuff it up it could be a good opportunity for the Robinsons to exit. In the meantime the fundamentals are good as far as I'm concerned.

[BlackPeter]

Yes no question the history with this company has not been good. The new CEO seems impressive and he's just done the rounds of the brokers who also seem impressed with him.

I Think given the chip shortage and Americas decision to produce more chips at home it makes sense for Rakon to set something up in America or do a joint-venture. If they don't stuff it up it could be a good opportunity for the Robinsons to exit. In the meantime the fundamentals are good as far as I'm concerned.

To be honest - while brokers seem to have opinions for various reasons, I never met yet any broker (or any other person) who was able to correctly forecast where a particular stock is going (i.e. forecasting with an accuracy higher than just the random hitrate). Sometimes they get it right and sometimes they get it wrong. Just refer to Ben Graham ...

And lets face it ...such a broker would in this case not just need to know how the chip market develops over the years to come, but as well whether the oscillators Rakon produces will be better or worse than the oscillators the competition produces. They would need to know, how the political games between the West and China will play out, whether big Telecom companies really want to buy crucial components from small and isolated manufacturers somewhere in the middle of the South Pacific. Is there a second source for Rakon oscillators? They would need to know as well, whether Rakon is not just able to develop desirable oscillators for the big players, but as well able to produce them in large enough numbers.

I guess the question whether they replaced one of their duds with a better CEO (however you measure that) is potentially one of the less significant indicators for Rakons future success.

Big risks ... and lets face it - selling hardware (and that's what oscillators are) is these days not really the big money spinner for the industry.
 

[LoungeLizard]

SP was in the mid $1.50's when RAK released their record end of year report. SP now firmly in the mid $1.20's despite strong FY23 earnings guidance. Clearly the market doesn't buy into the RAK story. Neither does the CEO (measly 50k in shares) and the CFO (20k). Hardly a ringing endorsement of their growth strategy is it?
It still isn't clear on what terms RAK will pay a divvy, but until they do I fear the market is going to continue to be wary of a management that continues to be tone deaf to shareholders. What is the point of a growth stagey if shareholders don't see any return on their investment and the SP declines 20%? If this is a great time for RAK's business I'd hate to see what happens when it hits hard times.