Kim Eng on 15 Feb 2012
A good set of 4Q11 results. Sarin’s 4Q11 net profit beat our expectations, coming in at US$4.8m (+271% YoY, +13% QoQ). FY11 revenue came up to US$57.8m (+27% YoY) with corresponding net profit of $17.4m (+56% YoY), slightly higher than our full-year net profit forecast of US$16.2m. A final dividend of 1 US cent per share was declared, bringing full-year dividend to 3.25 US cents per share. Reiterate Buy with the target price raised to $1.71.
Our worries were unfounded. We had expected 4Q11 to be weak due to seasonality and uncertainties associated with the global economy. Our concerns were unfounded as business sentiment in the sector was robust, with optimism in the market towards the end of the quarter. While demand from China and India is expected to continue to drive growth this year, Sarin does caution against a slower rate of growth if current macroeconomic conditions persist.
GalaxyTM sales momentum gaining traction. Sarin delivered 34 GalaxyTM machines in FY11, bringing the total number of installed GalaxyTM machines to 55 at year-end. This exceeded its expectation of doubling its installed base from a year ago. It further guided for the number of installed machines to reach 100 by end-FY12. We revise our FY12 forecast from 79 machines to 95 machines, as we see sales momentum gaining strong traction. Recurring revenue from GalaxyTM will swell as more machines are installed.
New revenue drivers. Sarin will have new revenue drivers in FY12, namely, the D-LightTM, D-LoupeTM and its Diamond Assay Service (DAS). These products are expected to have an impact on the topline from 2H12, with the former two possibly becoming significant contributors in the future. We are incorporating conservative assumptions for these new revenue drivers into our forecasts.
Reiterate Buy, target price raised to $1.71. We reiterate our Buy recommendation as we raise our FY12F net profit forecast by 23%, thereby revising our target price upwards to $1.71, pegged at 16x PER.
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