Riverstone - DBS Research 2021-02-26: FY20 Earnings Beat Our Expectations On Higher Margins

RIVERSTONE HOLDINGS LIMITED (SGX:AP4)

Riverstone - FY20 Earnings Beat Our Expectations On Higher Margins

Riverstone (SGX:AP4)'s FY20 revenue rose 85.0% y-o-y to RM1.8 bn, driven by higher sales volumes for both healthcare (HC) and cleanroom (CR) glove segments.
Gross proﬁt margin expanded to 49.1%, vs 20.1% in FY19, as the strong surge in ASP has more than oﬀset the increase in raw material prices.
Net margin of 35.4% was higher than our expectation of 30.5%.
Record high net proﬁt of RM647.3m was up 396% y-o-y, beat our expectations by 15%.

A bumper ﬁnal and special dividend of RM0.20 was declared, bringing Riverstone's total dividend for FY20 to RM0.22 per share (vs RM0.037 in FY19), translating to dividend payout ratio of 57%, vs 84% in FY19.
See Riverstone's dividend history.

Despite the positive developments on the vaccines for COVID-19, demand for healthcare examination gloves is expected to remain robust as healthcare systems around the world continue to fulﬁl immediate supply shortfalls as well as replenish reserves. The ongoing COVID-19 testing and vaccine rollout also require the usage of gloves.
Furthermore, the rise in awareness of hygienic practices globally has led to a higher usage of gloves in the medical as well as other non-medical sectors, such as F&B and retail.

Riverstone’s cleanroom gloves segment contributes ~ 25% to 30% to total revenue and ~50% to gross proﬁt. Even if demand for the more volatile healthcare gloves tapers oﬀ, demand for cleanroom gloves should be more stable. The cleanroom glove segment has also experienced growth in demand from the technology and manufacturing industries such as lenses, batteries and semiconductors.
As the market leader in the high-end cleanroom glove space, Riverstone is poised to beneﬁt from the diversiﬁed income streams which allow the group to ensure earnings resiliency for sustainable growth over the longer term.

Riverstone's cash and cash equivalents amounted to RM648.9m as at 31 December 2020, up 400% from end 4Q19.
Riverstone remains well-positioned to execute its expansion plans for future growth, and weather the macroeconomic headwinds associated with the COVID-19 pandemic.

The completion of the Phase 6 of Riverstone’s expansion plans has raised total production capacity by 1.5 billion pieces to 10.5 billion pieces of gloves annually. Riverstone has three further expansion phases in the near-term which will add up to 1.5 billion pieces of gloves each year to raise this ﬁgure by up to 15.0 billion pieces of gloves per annum by end-FY2023, representing a growth rate of 42.9%.
The new lines coming onboard will allow the group to capture this burgeoning market to drive growth in the coming years.

DBS Group Research DBS Group Research | https://www.dbs.com.sg/ 2021-02-26

SGX Stock Analyst Report BUY MAINTAIN BUY 1.850 SAME 1.850