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Ong expects “Sarine to post cyclical earnings uplift in tandem with the recovery of the global diamond industry. The successful dual listing on Tel-Aviv Stock Exchange by 2QFY2021 and better-than-expected adoption rate for its e-Grading could further catalyse the stock.” Sarine’s e-Grading is currently in beta-testing with two leading Indian manufacturers, and on track for its introduction to the market later this year and thus, Ong conservatively assumes “the group is able to capture just 1% of US$500 million market size of diamond grading in its FY2022E top-line.”
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The growing demand for lab-grown diamonds(LGDs) is expected to benefit Sarine who has “already generated revenues from this niche segment as its manufacturing-related, grading and retail/ branding technologies are all applicable to LGD.” However, Ong notes there are downside swing factors to consider, “resurgence of the pandemic could disrupt global diamond value chain due to worldwide restrictions and lockdowns”, “economic uncertainty may reduce consumer spending on diamond jewellery, this leading to less polishing and retail activities” or “infringement of the group’s intellectual property rights.” As at 1.55pm, Sarine Tech shares stood 1 cent higher or 1.626% up at 62.5 cents, or 2.4 times P/B, according to Maybank Kim Eng’s estimates.
