Brokers' Call: Sarine Technologies

SARINE TECHNOLOGIES

Broker: Maybank Kim Eng

Call: Buy

Target price: $1.94

Sarine Technologies delivered a record number of 20 precision machines for processing diamonds and gemstones, in the second quarter of the financial year 2016. The company's revenue could exceed US$20 million (S$27 million) due to positive midstream profitability that continued to drive manufacturing activities.

In previous quarters when revenue exceeded US$20 million, net profit ranged from US$5.7 million to US$9.1 million. But Sarine also cautioned about increased sales and marketing expenses as it intensified the rolling-out of its polished diamond services.

Still, the second-quarter net profit is expected to come in at least at the low end of its historical range, which would almost double its net profit, both quarter on quarter and year on year. It would also mark the third consecutive quarter of sequential recovery.

Some uncertainties remain, with traffic in the Las Vegas and Hong Kong jewellery trade shows last month quite muted. Therefore, end-consumer demand has not picked up sufficiently yet. Polished diamond prices also fell last month, reversing some of the gains made in the first half of the year.


DEL MONTE PACIFIC

Broker: CIMB

Call: Buy

Target price: 38 Singapore cents Del Monte Pacific's (DMPL) results hit new records with sales of US$498 million (S$671 million), gross profit of US$153 million and operating profit of US$63.4 million.

The Philippines market grew 11.2 per cent in peso terms and 6.4 per cent in US dollar terms, driven by an expanded user base and higher household penetration. DMPL continues to retain its strength in the Philippines with 91 per cent market share in tomato ketchup, 84 per cent share in canned pineapples, 81 per cent share in tomato sauce and 76 per cent share in canned mixed fruits.

But, Del Monte Foods Inc reported a full-year loss of US$5.4 million in the fourth quarter of 2016. Net cash from operations was negative due to excess inventory held on the balance sheet as a result of the loss of US Department of Agriculture contracts in the second half of 2016.

Del Monte Pacific's first quarter is seasonally weak. In the same quarter in 2015, the company reported a loss of US$12 million. In 2017 it will mirror the historical pattern and be loss-making.

The company has done a lot since acquiring Del Monte Foods Inc but more work remains to be done in financial years 2017 and 2018, before the full potential of the acquisition can be realised.


TRIYARDS HOLDINGS

Broker: OCBC Investment Research

Call: Buy

Target price: 51 Singapore cents

Triyards Holdings reported a 28 per cent year-on-year rise in revenue to US$82.1 million (S$111 million) in the third quarter of financial year 2016, and a 2 per cent drop in gross profit to US$13.9 million due to lower gross profit margin of 16.9 per cent versus 22.1 per cent in the same quarter in 2015.

This resulted in a 24 per cent fall in net profit to US$4.1 million in the third quarter of 2016, bringing the nine-month net profit to US$15.6 million which accounted for 61 per cent of our full year estimate and 56 per cent of consensus, below expectations.

The group's current net order book stands at about US$482 million, which is about 1.8 times its revenue in 2015.

A version of this article appeared in the print edition of The Straits Times on July 18, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe