Maybank Kim Eng has upgraded Sarine Technologies to “buy” from “hold” with $1.97 target price as the worst is likely over for the manufacturer of diamond evaluation systems.
In a Monday report, analyst Yeak Chee Keong says certain trends have created conditions for a return to profitability for midstream diamond polishing.
These include stronger US holiday sales; a further 7-10% drop in rough diamond prices in 2016 following a 15-20% decline in 2015; a reduction of polished diamond inventory and rough diamond demand nearly double at US$1 billion next April among other reasons.
According to Yeak, sales of its Galaxy system has jumped in 4Q15 to 13 units, compared to 1 in 3Q15 and 7 in 4Q14 helped by the new Meteor model and pent-up diamond. Sarine has also shared that orders for Jan and Feb have already equalled its entire 4Q15 business, implying 1Q16 should not be worse off than 4Q15.
“We believe that Sarine is on a recovery path and sequential earnings growth should provide clear catalysts for stock re-rating,” says the analyst.
Risks to watch include still weak Chinese demand, attempts by an Indian player to replicate Sarine’s Galaxy technology and potential fallout in the currency and equity markets which may impair the diamond industry once again.
Sarine Tech closed at $1.37 on Monday.
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In a Monday report, analyst Yeak Chee Keong says certain trends have created conditions for a return to profitability for midstream diamond polishing.
These include stronger US holiday sales; a further 7-10% drop in rough diamond prices in 2016 following a 15-20% decline in 2015; a reduction of polished diamond inventory and rough diamond demand nearly double at US$1 billion next April among other reasons.
According to Yeak, sales of its Galaxy system has jumped in 4Q15 to 13 units, compared to 1 in 3Q15 and 7 in 4Q14 helped by the new Meteor model and pent-up diamond. Sarine has also shared that orders for Jan and Feb have already equalled its entire 4Q15 business, implying 1Q16 should not be worse off than 4Q15.
“We believe that Sarine is on a recovery path and sequential earnings growth should provide clear catalysts for stock re-rating,” says the analyst.
Risks to watch include still weak Chinese demand, attempts by an Indian player to replicate Sarine’s Galaxy technology and potential fallout in the currency and equity markets which may impair the diamond industry once again.
Sarine Tech closed at $1.37 on Monday.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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