Broker re-rates Rakon after earnings upgrade

Rakon has upgraded its earnings forecast. Photo / NZ Herald

Brokers Forsyth Barr have upgraded their estimates for Rakon after the electronic components maker lifted its earnings guidance.

Rakon, which specialises in frequency control and timing solutions, said on Thursday it had succeeded in mitigating the supply chain pressures identified last November.

It now expects underlying EBITDA for the year ending March to be in the range of $49 million to $53m, up from November's guidance of $44m-$49m.

Managing director Brent Robinson said the significant supply chain risks have required month-to-month management of raw materials and parts to meet orders for 2022.

"We are now delighted to report we have largely overcome these challenges for the remainder of 2022 and have secured sufficient inventory to meet customer orders," he said.

Nevertheless, the rapid emergence of the Omicron variant of Covid-19 was posing new challenges.

"Consequently, achieving a result at the top end of this new guidance is now dependent on Rakon successfully navigating the risks of pandemic-related disruptions to production," he said.

In a research note, Forsyth Barr said that the mid-point of the forecast represented a "solid" 10 per cent upgrade.

Forsyth Barr said the company had also shared its strategy going forward with investors, which included winning in the high-growth 5G networks, cloud computing, and autonomous vehicle markets.

"Given the underlying market strength and comments by Rakon about mitigating supply chain issues, we now forecast 2022 underlying EBITDA at $51.0m, in the middle of the new guidance range.

"We consider the confidence from management and strength in underlying markets as good signs for the future."

Rakon's annual results are due out on May 26.

Rakon shares last traded at $1.89, having gained 146 per cent over the last 12 months.