Sarin Technologies Presentation November 2012 Disclaimer Please - - PowerPoint PPT Presentation
Sarin Technologies Presentation November 2012 Disclaimer Please - - PowerPoint PPT Presentation
Sarin Technologies Presentation November 2012 Disclaimer Please note that the information is provided for you by way of information only. All the information, report and analysis were and should be taken as having been prepared for the purpose
Disclaimer
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Contents
Company Profile 1 Key Drivers 2 Valuation Model 3 Risk Analysis 4 Recommendation 5
Sarin Tech Company Profile
Precision technology products for processing of
diamonds and gemstones Covers the value chain from planning, cutting, analyzing to grading diamonds
Diamond Value Chain
Rough Diamond Exploration & Mining Rough Diamond Sales Polished Diamond Output Diamond Retail Sales
31% of Retail Value 48% of Retail Value
21% of Retail Value
US$ 70.8 billion
(US$ 15 billion)
Polished Diamond Flow
Inclusion Mapping Planning Sawing & Shaping Polishing Cut Finishing Laser Inscription Visual Aids for Trade
Revenue Breakdown
Source: Company Data, FY 2011
Revenue Structure Trend
- Revenue for services (Recurring) has been increasing
10 20 30 40 50 60 70 80 Revenue (US Millions) Service (Recurring) Product 0% 5% 10% 15% 20% 2007 2008 2009 2010 2011 2012F
% of Service to Revenue
% of Service to Revenue
Key Drivers – Product Sales
Continued improvements in existing range of products; GalaxyTM and SolarisTM
- Galaxy, Solaris – Accurately maps rough diamond inclusions
New service centres in diamond manufacturing centres and deliveries of GalaxyTM and SolarisTM systems Expansion to target mining and retail segment
- Eg BHP Billiton, Tiffany & Co.
Current Customer Base
Sarin Tech
Australia India Israel Belgium Japan Korea South Africa South America Taiwan Thailand USA
Source: Company Website
Key Drivers – Recurring Sales
Development of inclusion mapping system for polished diamonds D-LightTM and D-LoupeTM
- Stated to be future key growth drivers by management
- D-Light: measures Light parameters (Brillance, Fire, Scintillation)
- D-Loupe: imaging technology for diamond assessment
Gemmological lab plans to utilise Sarin’s systems in their grading processes to issue GIA certificates (~5mil issued annually) (Extracted from Kim Eng Analyst Report)
Luxury Goods Industry Trend
A closer look…
Penetration Rates: Diamond Engagement Rings
Base Case
Assumptions
- Revenues will grow in line with the rise of middle
income groups in India and China
- Bain Diamond Industry Report of 6% Growth
- Company retains its market share in the industry
- Company mode of operations does not change
dramatically
- Working Capital Ratios maintain relatively stable
Scenario Analysis
Scenario 1
- Illiquidity premium of 2% added to discount rate
Scenario 2
- Revenue Growth Reduced to Zero for 3 years
Scenario 3
- Combination of Scenario 1 and 2
Intrinsic Value
Risk
Currency risk - the weak Rupee has affected clients appetite for capital investment Credit risk of its customers Low Liquidity - average daily volume for past year is at 287K but at lowest point it is only 2K End demand for diamonds in developing markets like China is key to propel growth
Insider Trades
- Sarin has been
initiating share buybacks
- Institutional investors
has been increasing their positions
Conclusion
Sarin Technologies is..
- Hidden gem
- Pays you (dividends) to wait ~2.5%
- Fundamentally sound technology company with a