2 Reasons To Like Sarine Technologies Ltd Despite A Recent 26% Fall From Its All-Time High

Diamond-manufacturing systems provider Sarine Technologies Ltd (SGX: U77) has not gotten much love in the stock market since its shares reached an all-time high of S$3.25 on 1 October 2014.

From that perch, Sarine Technologies’ shares then proceeded to fall steadily by 26% to S$2.41 today.  While short-term price movements often happen for no clear reason, this was not the case with Sarine Technologies.

In its latest fiscal first-quarter earnings report released in May 2015, the diamond-manufacturing systems outfit saw its revenue and earnings get slashed by 50% and 90% respectively. Sarine Technologies’ business had suffered as a result of a few external factors including austerity measures from the Chinese government and smaller spreads between the prices of rough diamonds and polished diamonds.

And yet, despite its troubles, there may be a couple of reasons for investors to feel optimistic over Sarine Technologies’ long term future. Here they are.

The interview (not starring Kim Jung-un)

On Monday, financial newswire The Edge shared an interview with Daniel Glinert, Chairman of Sarine Technologies, on the company’s future developments. The interview had some interesting nuggets which point to a possible future for the company which looks bright.

Firstly, Glinert confirmed that the firm’s newer product lines – including Sarine ProfileSarine Light and Sarine Loupe (Sarine Profile is actually based on a combination of the latter two products along with other technologies in the company’s portfolio)  will make up 5% of total revenue in the second half of 2015.

For those unaware, the three products mentioned represent Sarine Technologies’ foray into the downstream part of the diamond industry value chain (the retail and wholesale trading of polished diamonds).

According to Glinert, the new products may take two to four years before it becomes a “third leg” that is strong enough to power the company’s future growth. If Sarine Technologies is able to establish itself in the downstream portion of the diamond industry value chain (the company already has a strong presence in the midstream portion), that could mean more robust growth in the future.

Focus on the business, not the share price

Secondly, and perhaps more importantly, Glinert also mused on the importance of keeping its management team focused on the task at hand. Speaking on the share price volatility of Sarine Technologies, he said:

“The management team is quite adept at putting these issues [stock price volatility] aside. They don’t take the share price into consideration of what has to be done next. It is my job as executive chairman to make sure that they are isolated from these issues and at the same time keep the public abreast of what we are doing”

As a Foolish investor, I would applaud Glinert’s efforts to focus on things within the company’s control (its business operations) rather than things beyond its control (its share price movements over the short-term).

This trait could make Sarine Technologies’ management team one that you would want to have on your side for the long haul.

Foolish takeaway

It has been a tough eight months for Sarine Technologies and current signs point to its difficulties continuing in the short term.

However, as Foolish investors, we have to peer past the uncertainties that persist in the near future to see what lies ahead in the long-term horizon. In doing so, we may come away better at appreciating the business behind the ticker with Sarine Technologies.

To be sure, none of these reasons suggests that the shares of Sarine Technologies will rebound anytime soon. But, if the company is able to strengthen its business over the long-term, its share price may then eventually follow along.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.