Riverstone Holdings - RHB Invest 2016-08-15: Holding Steady Compared To Its Peers

RIVERSTONE HOLDINGS LIMITED AP4.SI

Riverstone Holdings - Holding Steady Compared To Its Peers

Riverstone’s additional 1bn expansion in capacity has already fully been taken up by existing and new customers in the healthcare space from the US and Japan.
In July, two lines already started, and another in August.The remaining three will be fully operational by November.
With cleanroom segment revenue expected to grow 10% this year, we continue to favour Riverstone, as they are well-positioned and more defensive than its peers.

By November, Riverstone should increase its capacity by an additional 1bn pieces to 6.2bn pieces of healthcare gloves pa.
Despite concerns over the industry’s oversupply issues, the company faced no problem filling up its capacity, albeit at a lower ASP.
We understand that the 1bn capacity has already been taken up by its existing and new customers in the healthcare space from the US and Japan. Management also shared that there is more demand from the healthcare space than they can meet.

Management guides for Riverstone’s niche cleanroom business revenue to grow 10% YoY, spurred by its customers in the tablets and mobile devices space. This would also act as a defensive cushion, which much less competition and higher margins.
This is augmented by the company’s launch of new products in the biotechnology, pharmaceutical, battery and solar space industries.

2Q16 results were well ahead of its peers, and Riverstone is holding steady, despite stiff competition. Despite a cloudy outlook for the glove sector, we believe Riverstone is well-positioned and more defensive than its peers.
Margins should stay around this level after recent price reductions.
Key risks are further weakness in the USD, higher rubber prices and increases in labour costs.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-08-15

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