Riverstone Holdings, after four successive years of expanding its production capacity, has proved a couple of things, one of which is that it has no problem finding customers for its output.

Year

Added capacity

Final Capacity

2013

--

3.1 billion

2014

+1.1 billion

4.2 billion

2015

+1 billion

5.2 billion

2016

+1 billion

6.2 billion

2017

+1.4 billion

7.6 billion

2018F

+1.4 billion

9.0 billion

2019F

+1.4 billion

10.4 billion

The Malaysian-based glove manufacturer listed on the Singapore Exchange will expand capacity again this year and next year which will raise the capacity to 10.4 billion gloves a year.

This is expected to drive earnings growth, following record earnings in FY2017 of RM129.3 million (7.4% y-o-y).

This forms the backdrop for three covering analysts to have a "buy" call on Riverstone stock. Recently, DBS Vickers and Maybank Kim Eng upgraded it from 'hold" to "buy" while CIMB maintained its "add" call.

For more on the FY17 results, see the Powerpoint materials here.


RS Glove StrippingNewly-produced gloves being stripped from moulds for packing at Riverstone's factory in Taiping. NextInsight file photo

Excerpts from analysts' reports:

CGS-CIMB

Maybank Kim Eng

DBS Vickers

Forecast 2018 net profit for Riverstone

RM146 m

RM150 m

RM154m

Target stock price

S$1.28

S$1.22

S$1.27


John Cheong, CFA (Maybank Kim Eng): Rerating w/better cleanroom growth & new capacity. 
johncheong maybank9.14
Upgrade to BUY with TP raised 16% to SGD1.22 based on 18x FY18E EPS (+1SD to mean due to healthy EPS growth and ROE) vs. 16x previously.  

The rerating should also be supported by stronger demand for its lucrative cleanroom glove segment. Recent rerating of Malaysia-listed peers could be a further catalyst.

Cleanroom glove demand will enjoy higher growth from increased demand from customers in the tech sector, while healthcare glove sales continue to expand from new market penetration. 

Carmen Tay (DBS Vickers): 
Upgrade to BUY with TP of S$1.27 as we see earnings growing on strong cleanroom ramp-up.
A global market leader in niche Class 10 
and Class 100 cleanroom gloves, Riverstone’s edge in the high-tech cleanroom segment sets it apart from the bigger boys.

Given intense 
competition in the healthcare space, we see value in Riverstone’s growing cleanroom business – which allows the group to command consistently higher margins vs peers (16% vs peers’ c.10-15% in FY17).

With new cleanroom facilities set to kick in from 2Q18, cleanroom capacity is expected to grow by c.33% to at least 2bn gloves p.a. The ramp-up on these new capacities should help drive higher growth in cleanroom gloves vis-à-vis the lower-margin healthcare business, allowing Riverstone’s earnings growth of c.16% to catch up with larger peers’ c.17%.  (Full report here)

briefing5.17Executive Chairman & CEO Wong Teek Son (centre) speaks with analysts after a briefing. CFO Tan Wang Thing is on the right while Financial PR director Tok Chong Yap is on the far left.  NextInsight file photo.

Stock price 

$1.03

52-week range

83 c – $1.19

PE (ttm)

17.7

Market cap

S$771 m

Shares outstanding

741 million

Dividend 
yield (ttm)

2.0%

1-year return

16.5%

Source: Bloomberg

Colin Tan (CGS-CIMB): Maintain Add with a higher TP of S$1.28.

We trim our FY18-19F EPS by 10.0-11.1% to factor in weakening US$ against RM and conservatively maintain our 24.0% gross margin projections to reflect high raw material prices. Approximately 80% of its sales are in US$ and c.40%-50% of its cost of sales is in US$.

Our TP is raised to S$1.28 as we roll over our valuation to FY19, based on a higher 
18.6x P/E multiple (sector average excluding Hartalega; 16.3x previously). Maintain Add. Key risks include higher production costs.



Watch video of our visit to Riverstone's factory in 2016 -->


Share Prices

Counter NameLastChange
AEM Holdings1.3000.020
AusGroup0.022-
Avi-Tech Electronics0.345-
Best World Int.1.360-
CEI0.950-
China Sunsine1.140-
CNMC GoldMine0.2650.005
CSE Global0.470-
Eagle HTrust USD0.655-0.005
Food Empire0.515-
Golden Energy0.169-
GSS Energy0.071-
ISDN Holdings0.215-
ISOTeam0.225-0.005
JB Foods0.660-
KSH Holdings0.445-0.005
Miyoshi0.032-0.003
Moya Asia0.0640.001
Nordic Group0.270-
Oxley Holdings0.3250.010
Procurri0.3700.005
REX International0.0960.003
Riverstone0.980-
Roxy-Pacific0.375-
Sing Holdings0.385-
SingMedical0.310-
Straco Corp.0.7250.005
Sunningdale Tech1.200-
Sunpower Group0.480-
The Trendlines0.087-0.002
Tiong Seng0.200-
Uni-Asia Group0.715-
Yangzijiang Shipbldg0.9700.030

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 4276 guests and no members online