Excerpts from analysts' reports

Credit Suisse issues non-rated report on RIVERSTONE HOLDINGS

Analysts: Sanjay Mookim & Anand Swaminathan 

chart_teekson9.14NextInsight inset pic of Wong Teek Son, CEO of Riverstone.  The stock touched a record high $1.015 two days ago. Chart: Bloomberg.

CS9.14
• Riverstone (RSTON) manufactures clean room nitrile rubber 
gloves (a specialised product) and other clean room
consumables; it also produces more commoditised 'healthcare' 
variant of gloves.

While its revenues are split equally, clean room
gloves were c.70% of 2013 GP.
 
● Clean room gloves are used in electronics industries to reduce 
contamination and electrostatic discharge, and require specialised 
formulation and treatment, which RSTON has developed over 
time.

Management believes quality standards and customer 
acceptance are high entry barriers in this space.

Clean room gloves—a niche product: These are specialised gloves used in electronics 'clean rooms', and are needed to reduce contamination and electrostatic discharge in the manufacture of items such as HDD and integrated circuits.

Management suggests:
 
● A clean room worker can use two-three pairs of such gloves in a day.
● RSTON has close to 50% global market share in the high-end Class 10 / Class 100 type of gloves.
● The gloves can be highly customised to a customer's needs; close to 40% of HDD manufacturing rejections are due to contamination. 
● The manufacture of these gloves requires specific formulation and cleaning processes, which RSTON has developed over time.
● As a consequence, RSTON is the sole supplier of such gloves to many customers. The company reduces supply risk by having several manufacturing plants (Malaysia, Thailand, China). 


Consensus forecasts, and growth

RSTON trades at 15x trailing PAT, and 11.1x 2015 forward consensus forecasts; other rubber glove manufacturing companies in Malaysia trade around 15x 2015 EPS. 

2013 EBITDA/PAT was up 39/46% YoY, while 1H 2014 PAT was up 22% YoY. 

RSTON's gross margins were up from 29/23% in 2010/11 to about 27% in 2013 (29% in 1H2014).  At the end of 2013, RSTON had net cash of RM114 mn (S$46 mn).

peers9.14 

 

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Comments  

#1 jack phang 2014-09-16 09:52
Ya, I also do believe that Riverstone is undervalued as it is listed in SGX and not Bursa. Nonetheless, as what Topglov boss mentioned earlier, the glove industry is undergoing more intensified competition although the target growth rate of the overall industry is in high single digit to 10% for next couple of years. It's in my watchlist and will accumulate when time is right.
 

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