Sarin Technologies Presentation November 2012
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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 (US$ 15 billion) 21% of Retail Value Rough Diamond Rough Polished Diamond Exploration & Diamond Diamond Retail Sales Mining Sales Output 31% of Retail Value 48% of Retail Value US$ 70.8 billion
Polished Diamond Flow Visual Inclusion Sawing & Cut Aids for Mapping Shaping Finishing Trade Planning Polishing Laser Inscription
Revenue Breakdown Source: Company Data, FY 2011
Revenue Structure Trend % of Service to Revenue 80 Revenue (US Millions) 70 20% 60 50 15% Service 40 (Recurring) 10% 30 Product 20 5% 10 0% 0 2007 2008 2009 2010 2011 2012F % of Service to Revenue • Revenue for services (Recurring) has been increasing
Key Drivers – Product Sales Continued improvements in existing range of products; Galaxy TM and Solaris TM Galaxy, Solaris – Accurately maps rough diamond inclusions New service centres in diamond manufacturing centres and deliveries of Galaxy TM and Solaris TM systems Expansion to target mining and retail segment Eg BHP Billiton, Tiffany & Co.
Current Customer Base Australia USA India Thailand Israel Sarin Tech Taiwan Belgium South Japan America South Korea Africa Source: Company Website
Key Drivers – Recurring Sales Development of inclusion mapping system for polished diamonds D-Light TM and D-Loupe TM 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 global competitive edge
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