Sarin Analysis

What it does

1. Sells precision technology products for the planning, processing, evaluation & measurement of diamonds and gemstones

Business

Sarin is the only listed company in this business of diamond processing, evaluation and measuring. It has a full suite of products for all the requirements from when the diamond is mined to when people buy diamonds from a retail shop. Below are the processes which require precision technology that Sarin provides (taken from 2011 Annual Report).


 Click here for the list of all Sarin's products.

 Financials

Why buy?
1. Sarin's Revenue been increasing, especially in the last 2 years.


2. Sarin's Operating Income has also been increasing significantly over the years.


3. Cash has been consistently increasing over the years. Cash per share is about $0.10 - 0.15


4. Divident is relatively high and consistent. Divident of about 3% annually. Promised 38% payout of earnings by management (as seen by 2009 Annual Report below). Actual payout ratio is actually 50%.



5. Zero long term debt (which is especially impressive for a technology company with needs for large R&D spendings).


6. Operating cashflow positive and increasing over the years.


Why not?
1. nil

Value

1. Book Value per share: $0.17
2. P/E: 16.7
3. ROE: 39%

Paying a P/E of 16.7 with such a high growth rate is considered very reasonable.

Sarin does not include its branding in its financial accounts. Having an estimated 80% market share in the world in an industry where trust is of key importance is definitely worth something. (It is the reason why coca cola can trade at such high PE.)

Final Verdict

Sarin is definitely a company worth looking at. It has strong financials, good divident payouts, great business model and high growth rate. Although, one might be held back by the large increases in price recently, it is still cheap if growth rate and branding is taken into consideration.