What You Must Know About Sarine Technologies Ltd’ Latest Third Quarter Results

Sarine Technologies Ltd (SGX: U77), a firm which produces equipment and technology used in the diamond manufacturing process, announced its third quarter earnings on Sunday evening. If you’d like a short-summary of how the company has fared, it’d be the five words: Firing well on all fronts.

Financial highlights

Revenue for the three months ended 30 September 2014 rose 17% year-on-year to US$20.4 million from US$17.3 million a year ago. The growth was fuelled by improved business sentiment, higher recurring revenue from a broader installed base of its Galaxy family of systems, and increased sales of its products.

Meanwhile, the company’s 17% increase in revenue had brought about an 85% spike in net profit to US$5.7 million. A year ago, Sarine had to suffer a one-off charge of US$2.6 million in taxes associated with the release of exempted profits from prior periods. If the effects of the one-off charge was stripped away, Sarine’s net profit for the quarter would actually have been flat.

For the nine months ended 30 September 2014, revenue grew 16% to US$69.5 million while net profit increased 20% to US$23.3 million.

Operational highlights: Shining brightly

Sarine’s recurrent revenue for the first nine months of 2014 was at 35%. This is a steady increase from around 13% seen in 2011. Generally speaking, the growing presence of recurrent revenue bodes well for a company as a firm would need to spend lesser to earn the same dollar of reccurent-revenue as compared to a non-recurrent revenue stream.

The total installed base of Sarine’s Galaxy family of systems is slightly under 185 as of the third quarter of 2014. This is remarkable as the installed base was just 50 around three years ago – this increase is what has helped drive the company’s growing recurrent revenue base and its progress is something investors should watch.

Financial strength

As of 30 September 2014, Sarine had a cash balance (including short-term bank deposits) of US$40.7 million. This is a nice increase from the amount of US$33.1 million seen at the end of last year. During both times, the firm had zero debt, so the balance sheet has quite obviously been strengthened.

For 2014, the firm generated operating cash flow of US$5.1 million for the third quarter and US$27.2 million for the first nine months of the year. These are big improvements over the corresponding periods a year ago, where the figures came in at minus US$2.2 million and US$11.6 million respectively.

Future outlook

In the future, Sarine plans to market its two new products, Sarine Light and Sarine Loupe, as standalone systems as well as joint packages. Mr. Uzi Levami, Chief Executive Officer of Sarine, commented on the initiative:

“Given the complementary nature of these two products, we believe such marketing efforts will provide additional impetus to broader commercial adoption of our unique imaging and documentation solutions.”

In the fourth quarter of 2014, the initial roll-out of Sarine Loupe at customers’ sites should be carried out and more significant revenue contribution from the new products and services is expected to be seen starting in 2015.

Shares of Sarine started trading at S$3.10 this morning, unchanged from last Friday’s close.

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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 Sudhan P doesn’t own shares in any companies mentioned.