Rectifier Technologies (ASX:RFT) shares jump on new guidance

Designer and manufacture of high efficiency power rectifiers — a critical component of electric vehicle (EV) chargers — Rectifier Technologies (ASX:RFT) has seen shares surge over 15% higher today after the company issued full year guidance substantially higher than the previous estimate.

For the year ended June 30 2019, CEO Yanbin Wang said preliminary figures suggested a pre-tax profit of between $2.5 – $3.5 million. This compares with previous guidance of $1.9 million in profit before tax issued less than a month ago.

While it’s certainly good news, and has put shares within spitting distance of recent highs, such a wide range in the latest estimate, and the discrepancy between the company’s recent estimate, does seem a little strange. After all, both were issued after the end of the latest full year reporting period.

The vaguery perhaps stems from accounting nuances associated with revenue recognition, but investors will have to wait until the full year audited results are released later this month to get a clearer picture.

Nevertheless, at face value, the forecast shows a business that is experiencing rapid growth. In the prior year Rectifier reported profit before tax of just $620,000, which itself was more than double the figure for FY2017.

As a preferred supplier to Brisbane based Tritium (who provide electric vehicle charging stations) Rectifier looks likely to see further growth. To date, Tritium has installed over 3,000 charging stations and a recent contract win is set to more than double that number in the coming years.

At the midpoint of guidance, and assuming 30% corporate tax, Rectifier Technologies is trading on a PE of around 43. That’s lofty relative to the market average, but not unusual for a company experiencing such rapid growth. Indeed, according to the community consensus on Strawman, shares are close to fair value.

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