Sarin Technologies

Kim Eng on 24 May 2012

1-for-4 bonus issue. Sarin announced a proposed 1-for-4 bonus share issue on 6 May 2012. The proposed issue received in-principle approval from the Singapore Exchange on 14 May 2012. Further to this, Sarin also announced the books closure date for the bonus share issue to be on 24 May 2012. The existing share capital of the company comprised of 271,656,904 shares (including 1,689,000 treasury shares). Up to 67,914,226 new bonus shares will be issued which will increase the total number of shares to 339,571,130. Consequently, our split-adjusted target price for Sarin is now SGD1.82.

Lining up new growth markets. Previously, Sarin’s products were primarily focused on providing solutions for the rough diamond market. Following the successful GalaxyTM product, which is still at an early growth stage, Sarin’s targeted move into the polished diamond segment should open up a new growth market for the company.

Launching D-LightTM in Las-Vegas. In line with its plan to penetrate the polished diamond market, Sarin will be launching its light performance technology product at the JCK show in Las Vegas from 31 May to 4 June 2012. JCK Las Vegas is where the jewellery industry comes together to buy and source for new products and will be an excellent opportunity for Sarin to showcase its D-lightTM product. The DlightTM assesses, grades and visualizes a diamond’s light performance characteristics, namely brilliance, fire, sparkle and light symmetry. We have estimated the future annual revenue potential for the D-lightTM at USD40m and net profit potential at USD29m. The other two products and service which it plans to launch in 2H12 for the polished diamond market are the D-Loupe and the Diamond Assay Service.

Adjusting our target price to SGD1.82, Maintain BUY. We adjust our target price accordingly for the bonus shares. Based on the enlarged number of shares, our target price would now be SGD1.82, still pegged to 16x FY12F PER. We also made adjustments to the per share figures. No change in our forecasts and recommendations. Maintain BUY.