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After A 2,800% Gain, Is There More To Come From This Share?

Sarine Technologies Ltd (SGX: U77) has been one of the best performing shares in Singapore over the past five plus years. At its lowest point in 2009, the company was trading at less than S$0.10. Since then, Sarine Technologies’ shares have grown to S$2.90, representing a gain of at least 2,800%.

It should be noted though, that part of the reason for such huge returns had been a collapse in the company’s share price during the Great Financial Crisis of 2007-09; at its peak in 2007, it was worth more than S$0.60 per share.

That said, even if we view the company’s share price increase from its peak in 2007, that’s still a gain of more than 380% in less than seven years. In other words, Sarine Technologies has certainly been a huge winner over the long-term.

The question though, is this: Can the strong growth continue for the company?

Where is the growth coming from?

Sarine Technologies supplies technological products and software to assist diamond producers. In 2009, the company earned 0.47 cents per share – that figure has since ballooned to 6.96 US cents in 2013.

Such growth had been mainly driven by the sale of its Galaxy family of products. The Galaxy products were first introduced in 2009 and has seen strong growth in the number of systems installed since. For instance, there’s a total installed base of 95 Galaxy-family systems as of the end of 2012; that figure has grown to more than 140 as of the end of 2013.

With more and more diamond manufacturers using Sarine’s products, it is thus able to have a strong client base from which it can then provide additional services and products to.

What’s next?

While Sarine Technologies is kept busy with its traditional customers from the diamond manufacturing industry, it is also keenly exploring previously untapped market opportunities.

For instance, the company had introduced and started selling its Sarine LightTM product for the first time in 2013. Sarine LightTM is used to grade certain optical qualities of polished diamonds which are prized by consumers and represents a possible avenue of growth for the company. That’s because it caters to the wholesale and retail trade of polished diamonds, which is a part of the diamond industry value chain where Sarine Technologies has not been involved with previously. The company’s Chief Executive, Daniel Gilbert, estimates this new market to be worth US$50 billion.

Of course, there’s always a chance that such growth potential fails to materialise according to the way investors expect it to. Given the company’s current valuation where it’s trading at 32 times trailing earnings, it does seem that the market does have pretty high expectations on the company’s corporate future.

In other words, the market seems fully aware of the company’s potential for growth. Investors who would like to partake in that would thus have to pay up for it.

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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 does not own any companies mentioned.