Brokers' take

Sarine Technologies | Buy

Feb 24 close: S$2.80

Target price: S$3.13

Maybank Kim Eng Research, Feb 24

FY14 net profit of US$27.2 million (S$37 million) met our expectations, but was slightly below the market's US$28.8 million.

We understand Indian manufacturers have reduced their output by 20 to 30 per cent. Sarine initially thought conditions would improve by Q1 FY15, but now expects persistence into Q2 FY15. Nevertheless, we expect its innovative products to spur a resumption of equipment demand.

Sarine has been making progress with new products ... The polished-diamond segment is expected to account for more than five per cent of revenue in 2015 and we see this evolving into a strong pillar for the company on greater production penetration.

In addition, it has unveiled a new technology, Allegro. This is a system that shapes and transforms gemstones at high speed and accuracy. It could add another recurring income stream when it is commercialised from late this year. We have not accounted for it.

Noble Group | Overweight

Feb 24 close: S$1.06

Target price: S$1.50

Morgan Stanley Research, Feb 23

WE forecast Noble Group's 2014 net income of US$527 million, up 45 per cent year-on-year. However, the bulk of the year-on-year improvement was seen in H1 FY14, off depressed H1 FY13 earnings. Our Q4 FY14 net income forecast of US$118 million is modestly higher year-on-year, driven by the deconsolidation of loss-making Noble Agri, following the sale of its 51 per cent stake to Cofco.

We believe management will be able to highlight its deleveraged balance sheet following the October 2014 sale of Noble Agri, giving Noble US$1.5 billion in cash plus US$1.8 billion in an intercompany loan repayment.

We believe management will be able to update investors on its capital structure review, which it highlighted on its Q3 analyst call.

Noble's shares have fallen about S$0.12 in the past week on potential impairment concerns, but this risk looks fully discounted, in our view.

Compiled by Chan Yi Wen

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