Sarin

Sarin: CS has unrated note. House note that as detailed in Sarin’s FY11 annual report, Co. expects growth will be driven by new products and derivatives, as Sarin strategises to leverage its dominance in planning tools to drive further customer adoption of inclusion mapping systems and to gain traction in the polished diamond trade. Note that the earnings outlook looks promising, according to mgt, with growth of the inclusion mapping Galaxy™system accelerating due to greater penetration and usage. Mgt has stated that Galaxy™-related revenues, at 1/3 of 1H12 sales, are set to boost their recurring income (now at 20%) and margin profile. The current valuation is at 9x FY13E P/E, vs historical range of 5-14x, based on consensus estimates. Note that the share price has, since its IPO in 2005, demonstrated a strong correlation with the polished diamond price index, which largely reflects the overall market supply-demand fundamentals.