Riverstone Holdings - RHB Invest 2015-11-06: On Track For a Record Year

Riverstone Holdings - Maybank Kim Eng 2015-11-06: Beat on strong margins RIVERSTONE HOLDINGS LIMITED AP4.SI 

Riverstone Holdings - On Track For a Record Year

  • Riverstone delivered a stellar set of results with PATMI surging 114% YoY to MYR35.3m on the back of MYR150.6m in revenue (+46.7% YoY) due to lower-than-expected opex. 
  • Maintain BUY with a higher SGD2.35 TP (from SGD2.25, 12% upside). 
  • Going forward, we expect the cleanroom wing to remain the profit driver. 
  • 4Q15 PATMI is expected to be 10% softer QoQ due to pricing pressure on its healthcare business. 


 3Q15 results beat expectations. 

  • Riverstone delivered a stellar set of results with PATMI surging 114% YoY to MYR35.3m on the back of MYR150.6m in revenue (+46.7% YoY). The strong result was attributable to the lower-than-expected opex ie sales, general & administrative (SG&A) expenses, as the company managed to keep its costs in check despite its fast expansion. 

 Cleanroom to stay as the key profit driver. 

  • As we have previously pointed out, what really sets Riverstone apart from its Malaysian healthcare gloves original equipment manufacturer (OEM) peers is its niche cleanroom business. 
  • Management expects this business to grow at 10% pa, as it chooses to only deal with customers that are reputable and with favourable credit terms, though this implies that the healthcare OEM business is likely to absorb the bulk of the new capacity, The cleanroom division can still surprise on the upside with better-than-expected demand, given that the production line is fungible. 
  • We expect Riverstone’s cleanroom business to contribute 70% of profits and 30% of revenue. 

 Raising forecasts and TP. 

  • We now expect Riverstone to report a slightly softer 4Q15 results with PATMI declining 10% QoQ. This is as its healthcare OEM business remains under ASP declining pressure. 
  • We lift our full-year earnings estimates for FY15 and FY16 by 3.4% and 3.2% respectively. 
  • Our new TP of SGD2.35 is based on a DCFE valuation (CoE: 8.0%, TG: 2%).


Edison Chen RHB Research | http://www.rhbinvest.com.sg/ 2015-11-06
RHB Research SGX Stock Analyst Report BUY Maintain BUY 2.35 Up 2.25

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