Sarine

Sarine: Sarine 1Q14 net profit improved 13% y/y (+102% q/q) to US$9.1m, while revenue accelerated 21% (+46% q/q) to US$24.4m. The record profit stemmed from increased Galaxy-family sales, as well as traditional planning products, while the q/q surge was attributed to the Divali holiday in India in Nov. Gross margin grew 1ppt (+2ppts q/q) on a change in revenue mix towards Galaxy-family related recurring revenue. With an installed base of Galaxy-family systems of ~160, recurring revenue contributed 30% to top line for the quarter from diamond cutting services and system maintenance. Operationally, Sarine continued to raise R&D spending (+27% y/y, +6.4% q/q), in line with its overall strategic and development plans to expand its product and services lines. Balance sheet is stable, with net cash position of $42.7m (+29% q/q), representing $0.154/share. Maybank-KE reckons that the first quarter results would have been higher if not for the deterioration in credit availability in India. Nevertheless, house expects Galaxy-family systems to be higher y/y, while the new Sarine Light is expected to see more agreements to be signed in 2Q14. At $2.40, Sarine trades at 18.2x 1Q14 annualized P/E and 8.5x P/B. Latest broker recommendations: Maybank-KE maintains Buy rating with $3.09 TP