Sarin

Sarin: Share price flirts with its all-time high of $1.60, registering a 55% return year-to-date, as Sarin shrugs and defies the recent market weakness which has plagued most counters. To date, Maybank-KE remains the only broker with a coverage on the stock, where we note that industry fundamentals remain buoyant with Debeers recently citing that overall demand for diamonds in 2013 will outpace the 3% growth registered in 2012. Strong first quarter sales reported by US Jeweler retailers such as Tiffany, Signet and Blue Nile lends further support to this thesis. In its recent 1Q13 results, Sarin’s revenue pushed to a record US$20.2m (+3% y/y, +42% q/q), while net profit expanded to US$8.1m (+3% y/y, +111% q/q). The stellar performance was underpinned by improved business sentiments in the diamond sector and increasing penetration of Sarin’s Galaxy system. Meanwhile, recurring revenue continues to grow, contributing c.30% of total revenue. This ratio is expected to grow as more Galaxy systems are deployed.