Sarine Technologies

It's very fascinating what the great expectation can do (either way up or down).
At this point, the price is down 22.94% in one single (or half) day.

Is Market Efficient?
I have to agree with Howard Marks' saying the efficient is acting fast but not necessarily right.

It's either the 22.94% fall is correcting the excessive valuation or overreacting to the short/medium hiccup in the industry.
Which is which? From previous experience, it could be the latter.
Let's see how manic depressive Mr Market can be.
This is indeed fascinating.

(13-04-2015, 09:25 AM)CityFarmer Wrote:

(13-04-2015, 09:09 AM)sg550319 Wrote: hmm...today it fell 0.3.

It may be due to the recent profit guidance

http://infopub.sgx.com/FileOpen/Press_Re...eID=343331

IMO, Sarine has technology edge, and moving to retail is also right (and likely disruptive), but it seems not able to re-act to the shift of market from India, to China. Sarine has no present in China market, IIRC.

(not vested, but interested once strategy changes)

(13-04-2015, 09:25 AM)CityFarmer Wrote:

(13-04-2015, 09:09 AM)sg550319 Wrote: hmm...today it fell 0.3.

It may be due to the recent profit guidance

http://infopub.sgx.com/FileOpen/Press_Re...eID=343331

IMO, Sarine has technology edge, and moving to retail is also right (and likely disruptive), but it seems not able to re-act to the shift of market from India, to China. Sarine has no present in China market, IIRC.

(not vested, but interested once strategy changes)

I beg to differ on Sarine.

There is no doubt that Sarine has technology edge. However, the inherent cyclical nature of the diamond industry that it supports and the lack of transparency of the industry as in many other commodities (except from guidance from company itself) makes it difficult for investors and analysts to understand.

I think this is not the first time that Sarine has disappointed and hence those ratings that the so called analysts have accorded (that turned out to be equally lay man - not experts in hindsight) have exaggerated the peaks and bottoms of Sarine share prices.

IMHO, Sarine deserves lower rating due to the inherent nature of a derived demand support player not the usual premium ratings.

I have been an odd lot investor in Sarine since pre GFC when 2G Capital was a substantial holder. I have not altered my holdings in Sarine. Maybe I m really an old dino.

Vested
Odd Lots
GG

(13-04-2015, 12:14 PM)greengiraffe Wrote: IMHO, Sarine deserves lower rating due to the inherent nature of a derived demand support player not the usual premium ratings.

Hi GG

Thanks for your insights. Can you elaborate a little bit on what is a "derived demand support player"?

Thanks in advance

(13-04-2015, 09:09 PM)EnSabahNur Wrote:

(13-04-2015, 12:14 PM)greengiraffe Wrote: IMHO, Sarine deserves lower rating due to the inherent nature of a derived demand support player not the usual premium ratings.

Hi GG

Thanks for your insights. Can you elaborate a little bit on what is a "derived demand support player"?

Thanks in advance

Sarine is essentially an equipment mfger that helps in certifying quality of diamonds if I m not wrong.

Demand for such specialised equipment is therefore dependent on the actual demand and supply of the diamond markets - hence the equipment is a derived demand product.

If I helped in clarifying myself.

GG

(13-04-2015, 09:32 PM)greengiraffe Wrote: Hi GG

Thanks for your insights. Can you elaborate a little bit on what is a "derived demand support player"?

Thanks in advance

Sarine is essentially an equipment mfger that helps in certifying quality of diamonds if I m not wrong.

Demand for such specialised equipment is therefore dependent on the actual demand and supply of the diamond markets - hence the equipment is a derived demand product.

If I helped in clarifying myself.

GG
[/quote]

Thank you

I just reviewed both cimb and maybank KE recommendations on Sarine - its a total train wreck in my opinion when analysts are forming judgement based on mgt's view.

CIMB:

Given the lower 1Q15 revenue guidance, we cut FY15-17 EPS by 10-44%. The
cuts would have had less severe earnings impact during normalised years.
However, Sarine is in the marketing spending mode now to promote interest in
its new products. Maintain Hold but lower our target price to S$2.02, based on
18x CY16 P/E. If De Beers continues to price its rough diamonds aggressively,
Sarine’s earnings will be hit and the market may no longer accord it premium
P/E valuations. This could cause the stock to de-rate to 15x multiple (8-year
average) which would translate into a share price of S$1.69 on our CY16
estimates. There could be upside risk to our CY15 EPS as we assume breakeven
net profit in 2Q15. We believe our CY15 forecast represents rock-bottom
earnings for Sarine.

I m not familiar with Sarine but just realised that valuations are high perhaps for its monopoly grip on the equipment needed to gauge the quality of diamonds? Hence when earnings fall or even turn negative, no matter what ratings on low or negative earnings won't matter...

Maybank KE:

Technology adoption not altered by this
Sightholders rejected 30% of roughs during DeBeers’ March sight.
Comparatively, 25%/10% in Jan/Feb sights were rejected. In its
conference call, management said this is really a standoff between
sightholders and DeBeers. The former is sending a strong signal for
lower rough prices. Limited credit is a lesser threat. How long the
general weakness will last is hard to predict but signposts are: 1)
any price reductions in DeBeers’ next sight at end-April; and 2) the
JCK jewellery trade show in Las Vegas at end-May, which will help
gauge polished-diamond demand. Importantly, we do not see this
as a structural weakness that would alter the need for Sarine’s
machines.
We cut FY15 EPS by 24% for 1Q15’s weakness and FY16-17 EPS by 4-
5%. Accordingly, our DCF TP (WACC 9.6%) drops from SGD3.13 to
SGD3.07. Catalysts are still expected from an eventual adoption of
its technologies by the industry. This view is not altered by shortterm
headwinds. Maintain BUY

Sounded like an expert but in actual fact have been relying on mgt guidance to formulate his views. So when the blind leads the blind of course there will be extremely high chance of an accident.

Like I say, notwithstanding Sarine's technological edge and leadership positioning on the equipment needed for assessing diamond quality, it is still a cyclical stock whose fate is determined by the industry giants - in this case De Beer.

This is no different from any iron ore miners especially the higher costs smaller players whose fate can be easily sealed by Giants like Rio, BHP and Vale.

Premium ratings is a convincing job by analysts looking for high growth companies. IMHO, I think a company like Sarine deserves single digit ratings due simply because of volatile earnings track record as seen historically.

Odd Lots Vested
GG

Any one knows who is Mr. Wang Yu Huei? Used to be substantial shareholder of Sarine, but has ceased to be as he disposed of around 3mn of shares which are all taken up by the directors of Sarine. CEO, exec-directors and non-exec directors have been buying shares over the past week..

(20-04-2015, 11:59 AM)blade Wrote: Any one knows who is Mr. Wang Yu Huei? Used to be substantial shareholder of Sarine, but has ceased to be as he disposed of around 3mn of shares which are all taken up by the directors of Sarine. CEO, exec-directors and non-exec directors have been buying shares over the past week..

Mr. Wang is from Asdew Acquisitions Pte Ltd, an very active PE company in Singapore. A brief of Asdew Acquisitions Pte Ltd below.

"Asdew Acquisitions Pte Ltd is an investment company incorporated in Singapore in 1999 which is predominantly owned by Mr Wang Yu Huei (“Mr Wang”). It invests mostly in listed equities, fixed income products and real estate products. Mr Wang was previously a director of Kim Eng Holdings Ltd from 1995 to 2004."

(20-04-2015, 03:04 PM)CityFarmer Wrote:

(20-04-2015, 11:59 AM)blade Wrote: Any one knows who is Mr. Wang Yu Huei? Used to be substantial shareholder of Sarine, but has ceased to be as he disposed of around 3mn of shares which are all taken up by the directors of Sarine. CEO, exec-directors and non-exec directors have been buying shares over the past week..

Mr. Wang is from Asdew Acquisitions Pte Ltd, an very active PE company in Singapore. A brief of Asdew Acquisitions Pte Ltd below.

"Asdew Acquisitions Pte Ltd is an investment company incorporated in Singapore in 1999 which is predominantly owned by Mr Wang Yu Huei (“Mr Wang”). It invests mostly in listed equities, fixed income products and real estate products. Mr Wang was previously a director of Kim Eng Holdings Ltd from 1995 to 2004."

Thanks! Anyway, did anyone managed to attend the AGM today?

Sarine Technologies 1Q2015 earnings tumble on weak demand

By Frankie Ho / theedgemarkets.com | May 11, 2015 : 6:50 AM MYT
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SINGAPORE (May 11): Sarine Technologies, which makes equipment for processing and evaluating diamonds, said its 1Q2015 earnings fell to US$871,000 ($1.16 million) from US$9.1 million a year earlier, hurt by weak consumer demand worldwide and a credit crunch on diamond manufacturers in India.

Revenue tumbled 50% to US$12.2 million.

Equipment sales in almost all its markets declined. Revenue in India, its biggest market, fell 54.6% to US$8.8 million.

Prospects in the coming quarters are not likely to get any better, according to Sarine, citing continued weak demand in markets including Hong Kong, where sales have languished following China's anti-corruption drive, and the Middle East, where the sharp fall in oil prices has dented diamond sales.

The credit crunch facing second- and third-tier diamond manufacturers in India will also continue to weigh, said Sarine.

Sarine shares ended flat at $1.965 last Friday.