Investors fired up over Rakon

Rakon hopes cellphone manufacturers will be chasing its chips.

Demand for shares in Rakon, the maker of the world's smallest GPS receiver, are reportedly bettering the expectations of the Auckland-based company's bankers.

The company, founded by engineer Warren Robinson, in a Howick basement in 1967, will shortly offer shares to investors at $1.60 apiece.

This price is substantially higher than the $1.10 to $1.40 indicative range the shares were first offered to investors and a later upwardly revised range of $1.20 to $1.50 a share.

Rakon and adviser UBS arrived at this figure after brokers said they could sell a substantial volume of shares at this price.

Rakon is today due to register the prospectus for its initial public offering of around $67 million and $70 million worth of shares. About 40 per cent of the shares will be placed with New Zealand investors.

Investors are looking at the potential for the company's chips to be used in the 500 million to 600 million mobile phones and the 70 million to 80 million cars manufactured each year.

Between 42.1 million and 44.1 million shares will be offered to the public. As much as 20 per cent of these will be new shares, raising as much as $14.5 million.

This new cash will be used 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 at Rakon's headquarters in Mt Wellington, where it employs 500 people.

Some potential investors are disappointed more shares are not available. But, it is thought the company, led by Robinson's sons Brent and Darren wants to establish Rakon's fair value before more new investors are brought on to the register.

On listing, the company is expected to 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 price is also despite a cut in its forecast trading profits for this year and next. Last year, when the company mooted a public offer, it had forecast trading profits of about $14 million in the past March year and $20 million next year. It now expects $11.4 million this year and $15.5 million next.

The reasons for the cut are unclear, but they may reflect a more conservative approach to forecasts ahead of the public float. Annual net profits are expected to rise from around $4.4 million to $7.2 million.

The family last year sold a 20 per cent share in the business to Peter Maire, founder and chairman of navigation technology specialist Navman.

He then said Rakon was New Zealand's "only real technology company".

"If you talk about real, state-of-the- art technology on a global scale, they're a market leader.

"They beat all of the major Japanese competitors hands down."