SINGAPORE (April 7): Earnings at Sarine Technologies are improving on the back of an economic recovery, and the company could do even better this year as demand for its diamond analysis tools grows.
The company’s Galaxy suite of inclusion mapping systems is used by diamond manufacturers to decide on the optimal cut for a diamond. Orders for these tools have picked up as the demand for polished diamonds increases.
Daniel Glinert, Sarine’s chairman, says the industry experienced a “good” Christmas shopping season last year in the US — a market that accounts for 40% of the world’s polished diamond market.
Asia-Pacific, which accounts for another 40% of demand, also did better, thanks to growing demand in China. In Hong Kong, diamond jewellery and luxury sales rose for the first time in two years last December.
After a two-year downturn, in which the margins of diamond manufacturers were squeezed because of low demand and high costs, pricing conditions are improving.
Prices of polished diamonds have held “steady”, Glinert says.
As a result, Sarine recorded y-o-y growth in all four quarters last year. For 4QFY2016 ended Dec 31, earnings grew 3.4 times y-o-y to US$4.9 million (S$6.9 million) and revenue climbed 52.6% y-o-y to US$18.9 million.
“All the macroeconomic data indicates that 2017 should be a very good year for the diamond trade. This year should complete the recovery from the downturn in 2015,” Glinert says.
Citi Research forecasts, however, that the retail diamond market will grow only 2% this year.
Although the US and China are showing strong demand, the Indian market is expected to decline 10%. Citi also warns that the diamond industry could be in worse shape in late 2017.
Shares in Sarine have advanced 15.1% in the last 12 months. Based on its April 4 close of S$1.865, it is trading at 23.2 times earnings.
Will it be able to continue to shine?
Find out the full story in “Higher demand spurs Sarine Tech as diamond industry nears full recovery” on page 10 of The Edge Singapore (week of April 10), available at newsstands now.