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Will This Israel-Based Company Be Affected By The Conflict In Gaza?

war

A company from Israel is not a common sight in Singapore. In fact, there is only one company based in Israel which is listed in Singapore. Now with the conflict in the Gaza strip intensifying between Israel and Hamas, will this company be affected?

The company in question is Sarine Technologies (SGX: U77), a leader in diamond cutting and imaging technologies. The company focuses on the development, manufacture, and sale of equipment that provides solutions such as scanning, design, and cutting of diamonds for the gemstone manufacturing industry.

Sarine Technologies has been a favourite amongst local investors for the past few years as evidenced by how its shares has gained more than 900% since the start of 2010; in contrast, the Straits Times Index (SGX: ^STI) has barely managed a 14% increase in the same period.

And to be clear, the company’s price increase hasn’t come about in a vacuum; its business performance has been equally amazing. For instance, Sarine Technologies’ revenue had rose from US$21.4 million in 2009 to US$76.4 million in 2013 while its net profit flew from US$1.5 million to US$23.9 million.

War….

But despite such stellar growth, there’s still something important to face: The company has its headquarters in one of the most conflict-prone regions in the world.

The Israeli government had recently just launched a ground attack into the Gaza strip after peace talks with Palestinian authorities had failed. For those of us in Singapore, war seems like such a distant concept. So, can a company actually continue to grow in a country that is technically at war?

Interestingly, although Sarine Technologies is based in Israel, it does most of its business in India, the diamond-cutting centre of the world. According to its latest annual report, the company had obtained about 77% of its revenue from India and only 5% from Israel itself.

New technologies

Furthermore, Sarine Technologies is turning its focus to its software products such as Sarine Light and Sarine Loupe. Sarine Light is a diamond grading system and Sarine Loupe is an imaging system that displays accurately and digitally, the visual quality of a diamond without buyers having to view the actual stones in person.

Foolish Summary

Although it seems that Sarine might not be greatly affected by the conflict in Gaza, investors must take note that Israel is also one of the fastest growing markets for the company. More importantly, there is still the chance of the Israel-Hamas crisis escalating further. If that happens, the company’s business might be at real risk since its management resides in Israel. For now, let’s hope peace returns to the conflict-torn region soon.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.