RIVERSTONE HOLDINGS LIMITED
AP4.SI
Riverstone Holdings - Positive expansions & currency boost
- Expansions of Phase 2 & 3 are on track. Four out of six lines in Phase 2 have commenced production and the outstanding two lines are expected to start by Oct 15.
- Orders have been secured for the entire new capacity, up to end 2015. Positive outlook for next year on strong orders and currency boost.
- Maintain BUY & SGD2.12 TP. Catalysts from possible actions to boost stock liquidity and better-than-expected earnings.
Site visit to expanding Taiping plants in Malaysia
- We attended a site visit to Riversone’s new facilities, hosted by the company on 9 Oct 15 in Taiping, Malaysia. The program was well attended by c.10 sell side analysts. During the visit, we saw
- Phase 1 facility, which started full production in 4Q14;
- Phase 2 facility, is expected to complete in Oct-15, four out of six lines have commenced operations and two more are undergoing trial production;
- Phase 3 facility, which is currently under construction and should be commissioned in 3Q16.
- There is no change to Rivertone’s plan to expand its production capacity in 5 phases of 1b pa., from 2014-18. By 2018, Riverstone’s capacity would increase to 8.2b, from 5.2b in end-2015.
Strong demand and currency boost; Maintain BUY
- Importantly, management reaffirmed that orders have been fully secured for its existing and new capacity, up to end-2015. Furthermore, there should be no issue filling up the entire 2016 capacity as demand looks to be outpacing the additional supply. Certain orders may even have to be turned down due to capacity constraints and customers diversification strategy.
- Cleanroom gloves, which made up of c.70% of Riverstone’s profit, are enjoying almost the full benefit of USD strength due to lack of competition. Riverstone has even secured new customers from Vietnam.
- On the other hand, ASP for the healthcare gloves has softened against rising competition. As a result, part of the currency benefit had to be passed on.
- Maintain BUY and TP of SGD2.12, this is at a slight discount to the average 21x target for its peers, for smaller size.
John Cheong
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-10-12
Maybank Kim Eng
SGX Stock
Analyst Report
2.12
Same
2.12
