Rakon bullish on GPS sales

Rakon, the shortly-to-be-floated maker of the world's smallest GPS receiver, is expecting its sales next year to increase by almost a quarter as its technology is adopted by makers of cars and mobile phones.

The figures, detailed in the prospectus for the company's $66 million share offer which opened yesterday, show sales growing from $73.3 million in the year to this March to $90.6 million next year. Over the same period it expects net profits to grow $4.4 million to $7.2 million.

The forecasts reflect assumptions the directors reasonably expect to occur, compared to a less robust standard used in other recent float forecasts, which were based on possible outcomes but not the most probable outcome.

Profits may rise higher still, since the forecasts were prepared using a New Zealand dollar conversion rate of US67c. Yesterday's close was US62.65c.

The company makes around 37 per cent of its sales in North America.

But investors should not expect to see the proceeds in shareholder payouts as Rakon has no plans to pay dividends.

Rakon says: "Surplus funds will be retained in order to capitalise on immediate and future growth opportunities."

The company was founded by Warren Robinson in a Howick basement in 1967. It started developing crystals for electrical applications and has since branched out into oscillators and GPS (global positioning system) receivers.

It is now eyeing the potential for these technologies to be used in the 500-600 million mobile phones and the 70-80 million cars manufactured each year.

Around 41.2 million shares in Rakon are to be offered to the public at $1.60 apiece. Of these, 35 million are being sold by the Robinson family trust, while another 6.25 million are also being put on the the market.

After listing, the family trust will retain a 22.6 per cent stake. Warren's sons Brent (managing director) and Darren (marketing director) will have stakes of 9.3 per cent each.

Peter Maire, founder of the GPS receiver company Navman, will retain a 15.6 per cent stake.

The new shares will raise about $10 million to expand the company's sales and marketing presence and production capacity at its Mt Wellington headquarters. As many as 30 new jobs could be created there, where Rakon employs 500 people.

The company for the first time is being less coy about its links to the military, splashing images of warplanes and soldiers over its prospectus. Last year talk that its products ended up in smart bombs used in Iraq sparked a media storm.

Around 65 per cent of its sales come from its top 15 customers. US defence contractor Rockwell International is a key customer.

Investor demand for the shares has so far been strong.

This is reflected in the $1.60 share price, substantially higher than the $1.10 to $1.40 indicative range at which the shares were first offered to investors and a later revised range of $1.20 to $1.50 a share.

On listing, the company will have a market value of around $170 million, well ahead of its initial expectations disclosed by the Business Herald in January of about $147 million.

The float is expected to cost as much as $4.3 million.

But Rakon will cover only $1 million of this charge, the rest covered by the vending shareholders. UBS is the chief beneficiary.

RAKON TIMETABLE

* Yesterday: Share offer opens
* May 12: Offer closes
* May 15: Shares allotted
* May 16: Trading begins