Singapore Stock Market News

Sarine Tech - Profit warning

StockFanatic
Publish date: Tue, 14 Apr 2015, 01:25 PM
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Sarine has warned that 1Q15 revenue could fall 50% yoy to US$12.2m, likely resulting in breakeven at net profit level. The key concern remains the unwillingness of major rough diamond supplier De Beers to cut prices and other concomitant issues such as tight credit conditions and polished diamond inventory overhang. We cut our FY15-17 EPS forecasts by 10-44% and lower our target price to S$2.02, still based on 18x CY16 P/E (0.5 s.d. above its 8-year mean). Maintain Hold.

If De Beers does not cut rough diamond prices, Sarine's short-term earnings growth will suffer and we think that the stock could de-rate to 15x CY16 P/E (8-year average) or a share price of S$1.69.
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