RAK Rakon

[tobo]

so RAK or, say DGL, no longer fit the bill? You think they won't fall sufficiently further in response to DJ fall?

[AMR]

Time to short would be after it rallies but does not violate the last peak as Phadreus says.

I'm really unsure about the market at the moment to be honest. A lot of midcaps started falling six months to a year ago (GPG, SKC, GFF, FPA, FPH etc), the large caps are all ranging (TEL, FBU). Better to ask someone with more experience, this is my first bear market but it is also the first bear market in which the US is being propped up by China.

Market issues aside RAK is also experiencing logistics problems. The question here is, will they be able to sort out this problem in a single quarter? If not, then future earnings may also be subjected to similar pressures.

[Hoop]

A positive spin from NZH today.

A quote from that article....
...."First NZ Capital analyst Jason Familton said he valued Rakon's shares at $3.82 on a discounted cash flow basis. "[Investors] maybe got ahead of themselves a little bit," he said".....

I have similar thinking as AMR...Rakon's profit slow down after announcing large growth in sales indicates increased competition, increased debt. Startup (France?) and logistic costs seem to be problem areas in need of fixing. Difficult to see these areas being fixed in the short term.

Disc: cashed out, but on my watchlist..maybe a good bet once this financial subprime mess and possible USA recession rumours are over...or a big fall in the NZ$.

[a bowden]

With the stock falling sharply today what are everybody's thoughts on RAK, falling much more than I expected. Is the share still overvalued, or is the dollar the main problem?

Should we be looking to buy at a bargain now, or is their more to go?
With no news from RAK for a long time their seems little reason for it to fall so sharply.

I am still in which is a major mistake, but we all make those.

[trackers]

With the stock falling sharply today what are everybody's thoughts on RAK, falling much more than I expected. Is the share still overvalued, or is the dollar the main problem?

Should we be looking to buy at a bargain now, or is their more to go?
With no news from RAK for a long time their seems little reason for it to fall so sharply.

I am still in which is a major mistake, but we all make those.

Personally think anything under $4 is a screaming buy... I'm accumulating.

Looking forward to hearing more about how the China production expansion is coming along; onwards and upwards

[Hoop]

Quote from Winner69 from todays PPL thread.....

"Interesting study done in the US found that once a 'growth' rated stock (ie one witha high PE) disapoointed the market over the next few quarters was often rerated as a 'value' stock (ie average sort of PE) but the main point of the research showed that it was rare for these stocks to ever regain a 'growth' status .... meaning future shareprices generally over moved relative to earnings performance (with a PE that stayed around the market average).......

Winners quote can be applied for RAK as well.

DB has RAK's PE Ratio presently at 38....ok it has been around 48-50 until the last financial report, so the market is in the process of re-rating RAK.

Its USA market is looking suspect with a possible recession looming, so I would not be surprised if the market slows and margins are further squeezed.

Therefore RAK is presently in:
a PE Ratio, market re-rating
a sharemarket going into a Bear Market phase
a slow down of it's markets
it's Competition is hotting up

So RAK is caught in a double (quadruple) wammy.

Watch the DOW, most times the DOW has a major down day RAK follows. With the DOW (and NZX) in a confirmed bear market there will be many down days.


AMR is on to it. One part of the Bear Market investment strategies is shorting downtrending stocks.


Disc: sold RAK the same day the disappointing result came out.

[winner69]

I wouldn't write RAK yet off yet HOOP .... the difference from PPL is that RAK still expects to double earnings over the next year (or so) which means that the current PE(although high) is not totally outrageous but does have high expectations built into it.

I don't think RAK is in the process of being rerated from 'growth' to 'value' at the moment ... the current weakness being due to lower than expected earnings in F08.

So the shareprice prob won't move much in the near term until the future performance becomes more clear

But what a change if the expected growth premium goes out of this share .... lets say eps only gets to 15 cents next year ... and rerated down to a PE of 15 .... thats a shareprice of 225

Like PPL the time to be in RAK was post IPO until the market found a the top and then to get out (in my case about 500) .... and then sit on the sidelines to see what happens ..... and at the moment I don't see RAK as a compelling buy .... neither do the charts.

RAK may still have its day in the sun .... just have to be patient.

[trackers]

Quote from Winner69 from todays PPL thread.....

"Interesting study done in the US found that once a 'growth' rated stock (ie one witha high PE) disapoointed the market over the next few quarters was often rerated as a 'value' stock (ie average sort of PE) but the main point of the research showed that it was rare for these stocks to ever regain a 'growth' status .... meaning future shareprices generally over moved relative to earnings performance (with a PE that stayed around the market average).......

Winners quote can be applied for RAK as well.

DB has RAK's PE Ratio presently at 38....ok it has been around 48-50 until the last financial report, so the market is in the process of re-rating RAK.

Its USA market is looking suspect with a possible recession looming, so I would not be surprised if the market slows and margins are further squeezed.

Therefore RAK is presently in:
a PE Ratio, market re-rating
a sharemarket going into a Bear Market phase
a slow down of it's markets
it's Competition is hotting up

So RAK is caught in a double (quadruple) wammy.

Watch the DOW, most times the DOW has a major down day RAK follows. With the DOW (and NZX) in a confirmed bear market there will be many down days.


AMR is on to it. One part of the Bear Market investment strategies is shorting downtrending stocks.


Disc: sold RAK the same day the disappointing result came out.

Nice to have some more input! Can't agree though..

RAKON shareprice has lost 40% (!) off its 52-day high, thats huge. Most will agree that it is due to their 'disappointing announcement' right?

Lets review that announcement:

Rakon achieved a 78% increase in revenue to NZ$90 million in the first half of the current financial year.

This increase over the same period last year was due to the continued rapid growth of sales into GPS applications, as well as contribution from our European business acquired in March 2007. EBITDA was up 22% to NZ$12.4 million when compared to the same period last year. Growth
in both revenue and EBITDA was restricted by the significant weakening of the US$, which impacted all of our global operations, but in particular New Zealand. Globally over 80% of Rakon’s revenues are earned in US$. Rakon seeks to balance this with sourcing as many of its materials in US$ as possible, but a significant proportion of our costs incurred are in other currencies, reflective of the location of our businesses. Had exchange rates remained at the levels they were in the first half of the last financial year Revenue and EBITDA would have grown by 93% and 67% to NZ$98 million and NZ$17 million respectively.

Its disappointing that revenues and EBITDA didn't grow by 93% and 67% due to the exchange rate, but should 40% of the value of the company be wiped away as a result? Personally, I don't think so....

Looking to pick up even more at these levels.

[Hoop]

Hi Trackers

I hope you're right.

You welcomed the input...sorry mine happens to be rather negative..maybe a rub off from reading all the doom and gloom news abroad.

Today is another shocker from the USA with weaker than expected Dec retail sales figures (they weren't expecting great results to start with).

There is a feeling out there and commentators are starting to mention the topic of a sharemarket meltdown. If there is a meltdown or just a more ordinary decline within the Bear market phase, history has it that good fundamentals will not make any company immune to the overall market effects.

RAK is in a downtrend, there are no buy signals yet. Yes, in a Bear Market phase opportunities arise to buy super cheap shares, but Trackers you and I just differ on the value of RAK, you think they are super- cheap, I think they are still ...well not expensive but not cheap either as their investment risk premium has risen.

I am suspicious of companies making a big noise when reporting in EBITDA, I know this is the best indicator to establish cash flow, however I am uneasy about the information not mentioned, such as the all important Company Structure. The information is hard to find in the 2007 report but reading between the lines there is a concern that the company has been forced to grow too quickly, has increased it's debt considerably, has start up problems in France, it's logistics company lines are clogged and need expanding to shift the increasing product flow, and it's lines of communication within it's expanding network needs more efficiency.......To keep it simple this company has the speed wobbles.

Yes the EBITDA growth is spectacular, but it's niche market is getting crowded now as household products now demand faster crystals, and with it comes the competition....lower profit margins, more marketing expense etc.

Call me old fashion but in the end I still believe in that bottom line figure.

Remember RAK shareprice got caned with its latest "good" result in a Bull Market phase..it's next result announcement will probably be in a Bear Market phase.

There is plently of time to buy RAK...so why rush in now..why not wait until the TA buy signals emerge.

[winner69]

There is plently of time to buy RAK...so why rush in now..why not wait until the TA buy signals emerge.

Agree Hoop - as I said earlier RAK may one day have its day in the sun