KEY POINTS:
GPS technology company Rakon hit record production levels in November, the same month its share price started a dramatic fall.
The NZX-listed company made 6 million temperature compensated crystal oscillators in November, mainly for GPS applications.
Managing director Brent Robinson said the company had maintained its reputation for quality through commitment to 100 per cent performance testing of all product.
"Putting our growth in perspective, in 2006 we were producing up to three million units a month, one year later we have doubled that," Robinson said.
However, the share price closed at $3.70 yesterday after a downward trend from about $5.20 in November.
The slide began after Rakon put out a half-year result below some market expectations, despite strong revenue growth and increased net profit.
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 guess the currency risk was the one thing which probably people were forgetting a little bit about."
The US dollar accounted for more than 80 per cent of revenue, with the shift in the cross rate compared with the previous half-year slicing $4.6 million off trading profit.
Despite the recent fall the share price was similar to the year and still more than double the issue price of $1.60 in May last year.
Market sentiment was currently reasonably negative with higher risk companies probably getting greater punishment, Familton said.
The price to earnings ratio for Rakon had been running at up to 60 times earnings but based on his prospective earnings forecast had dropped back to about 35 times, Familton said. The New Zealand average ratio was about 17 times earnings.
"You'd anticipate it to be higher than what the New Zealand market average is given the growth that it does have," Familton said.
"It has come back to a level which I think is a lot more reasonable now.
"From an operating perspective there may be still some questions around the under-delivering in France but I guess other than that I think most people are more than happy with what they've been doing and they continue to deliver."
