Rakon shares sink to new low

Shares of Rakon have sunk to a record low on concern of increased competition and the strength of the New Zealand dollar. Photo / Natalie Slade

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 shares traded at 47 cents today.

The New Zealand dollar has gained 21 per cent 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 reported 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.