Sarin Technology's net profit up 3% to USD8.1m

Thanks to increased penetration of GalaxyTM.

According to Maybank Kim Eng, Sarin reported a set of record quarterly results with 1Q13 revenue of USD20.2m (+3% YoY, +42% QoQ) and net profit of USD8.1m (+3% YoY, +111% QoQ). 1Q13 net profit makes up 26% of Maybank's previous FY13F forecasts. 

Maybank noted that the stellar performance was a result of improved business sentiments in the sector and increasing penetration of the GalaxyTM system. 

Here's more:

Galaxy sales to accelerate in 2Q13. A total of 105 Galaxy systems are now deployed worldwide. Nine Galaxy systems were delivered in 1Q13, which was weaker than expected. However, Sarin shared that deliveries were held back by the Passover holiday in Israel and bureaucratic issues in India on their fiscal year end.

These resulted in delays in delivery of several systems in which payment had already been received. Furthermore, Sarin indicated that Galaxy orders for 2Q13 have almost matched that of 1Q13 already, and there is still about 2 months to go before the end of the quarter.

Recurring revenue building up. Recurring revenue now accounts for about 30% of total revenue. This ratio would continue to grow as more GalaxyTM systems are deployed, adding more stability to its earnings.

Sarine LightTM and Sarine LoupeTM to gain more grounds. Sarin achieved a great step forward when CIMA (7638 JP), a leading Japanese jewellery chain, adopted the use of Sarine LightTM.

Discussions are now underway with other retailers and gem labs to adopt the technology which would help in establishing its position in the polished diamond sector. Not to forget, there is still Sarine LoupeTM, which could be launched by 4Q13 and being a B2B platform, the speed of uptake could be faster than Sarine LightTM.

Strong double-digit growth looks more achievable. Sarin has made good progresses which are consistent with its communicated strategies, making our 31% EPS CAGR expectations look even more achievable.