Riverstone Holdings - RHB Invest 2021-05-05: Solid As A Rock


Riverstone Holdings - Solid As A Rock

  • Nitrile glove producer specialising in cleanroom and healthcare glove production;
  • Expansion plans on track;
  • Riverstone has a strong balance sheet with net cash of MYR641m.

Riverstone - Company Profile

  • Riverstone (SGX:AP4) is a nitrile glove producer specialising in cleanroom and healthcare glove production. Riverstone is primarily a nitrile glove manufacturer, with a 95% focus on this – the remaining 5% consists of latex gloves. Its clients are mainly from the cleanroom and healthcare industries.
  • Riverstone has two business models: Original brand manufacturing or OBM business model for cleanroom; and original equipment manufacturing (OEM) for healthcare.
    • Products from Riverstone’s cleanroom division are sold under the “RS Riverstone Resources” brand, for use in cleanroom environments.
    • As for the healthcare division, Riverstone is an OEM producer – similar to most glove producers in Malaysia.
  • Revenue contribution from the cleanroom and healthcare divisions are at around 30% and 70%.

Riverstone - Investment Highlights

FY21F earnings expected to surge 49% y-o-y to MYR967m.

  • This should be supported by better ASPs and higher sales volumes. Even after COVID-19 ends, we expect demand for gloves to remain strong on consumption growth in developing countries. Riverstone also has a unique ~30% revenue exposure to cleanroom gloves, which is a beneficiary of growth in the semiconductor industry.

Expansion plans on track.

  • Riverstone has completed its Phase 6 expansion on time, raising its total capacity by 1.5bn pieces pa (ppa) or 17% to 10.5bn ppa. For FY21-23F, the company aims to increase its capacity by 1.5bn ppa each year.

Positive on recent land purchase.

  • Riverstone is investing MYR5m on land purchases. It recently acquired a 1.67-acre industrial land in Bukit Beruntung, Selangor, and the land valuation works out to MYR69.00 per sqf. We gather that the acquisition was done to expand its cleanroom glove manufacturing capacity. We are positive on the deal, as capacity expansion bodes well for future earnings.

Good dividend yield of 7%.

  • We expect Riverstone's FY21 dividends to grow 32% y-o-y to MYR0.29. Although Riverstone does not have a dividend policy, its payout has been between 38% and 50% over the past five years.

Riverstone - Company Report Card

Latest results.

  • Riverstone’s FY20 earnings of MYR647m makes up 117% and 137% of consensus and our estimates. The positive deviation is on better-than-expected ASPs for both the healthcare and cleanroom segments. FY20 earnings surged 396% y-o-y to MYR647m, on higher ASPs and volumes.

Strong balance sheet with MYR641m net cash

  • – a significant improvement from its net cash of MYR117m as at end-Dec 2019. This was on the back of higher net cash flow from its operations in FY20, which had surged 320% y-o-y.


  • Riverstone declared total dividends of MYR0.16 in 4QFY20, bringing total FY20 dividends to MYR0.22, and representing a decent dividend yield of > 5%.


  • Both co-founders of Riverstone are still with the company.
    • Wong Teek Son has 31 years of experience in the glove manufacturing industry, and is mainly in charge of developing business strategies.
    • Lee Wai Keong is responsible for production facilities, and has helped the company meet the high quality control and production standards required in the cleanroom industry.

Riverstone - Investment Case

Stay BUY with S$1.85 target price

Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2021-05-05
SGX Stock Analyst Report BUY MAINTAIN BUY 1.85 SAME 1.85