Sarin Technologies Ltd. - How long before new diamond polishing machine generates significant revenue?

26/3/2013 – Maybank Research says the 17% surge in Sarin Technologies' share price over three weeks after its Q4 FY12 results reflects increased confidence in future prospects.

The Research house spoke to management on plans for Sarine-Light when they were in Singapore in February and were pleased with its developments.

According to Rapaport, a report that provides a standard for the pricing of diamonds, the recent Hong Kong Jewellery Show with much better business than a year ago, and exceeding most expectations.

This supports the cautiously positive outlook for luxury goods, despite the uncertainties in the global economy.

While there are no signs yet of a price increase for polished diamonds, the analyst thinks improved demand may shift pricing power to the retailers.

Further, a rise in rough diamond prices would also prompt manufacturers to seek higher prices.

These factors may eventually push polished prices higher.

This should support Sarin in marketing its Sarine-Light.

Hence, Maybank Research maintained BUY rating with an unchanged target price of S$1.48.

S&P Research does not expect any significant contribution from Sarine Light in 2013.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. How long before the new diamond polishing machine generates significant revenue?

Sarin is taking its first steps into the polished diamond industry with Sarine-Light.

When can we see this translate into revenues?

Question

2. Which retail chain in Asia has it entered into a commercial agreement for Sarine-Light?

A leading Asian retail chain has apparently agreed on an initial commercial agreement for Sarine-Light and initial deployment is expected in early Q2 FY13.

But which one?

Question

3. What is the price per certificate agreed with the retail chain?

Sarin is currently in talks with several other potential customers, which includes gem labs and retail chains and one of them is already running a pilot program.

Question

4. Will contribution from higher margin products and services offset higher operating expenses in FY13?

Sarin’s gross margin rose from 66.2% in FY11 to 68.1% in FY12.

The hope is that this will continue on the back of rising contribution from recurring revenue and revenue from its Galaxy-branded system installations at customers’ premises, as opposed to service centres.

However, operating expenses will rise due to higher marketing expenses for its new products, Sarine-Light and Sarine-Loupe, and the establishment of marketing offices in New York and the Far East.

Question

5. Where will the new "Far East" office be located?

Question

6. Why are the Sarine-Light and Sarine-Loupe machines spelled "Sarine", when the company's name is spelled "Sarin"?

Just a curious question, really.

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

Sofar, we have not had a reply (which is why you are seeing this message).

Sources & further information

Sources

Maybank Research Report

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