Riverstone - CGS-CIMB Research 2021-08-06: Tailwinds Subsiding

RIVERSTONE HOLDINGS LIMITED (SGX:AP4) | SGinvestors.io RIVERSTONE HOLDINGS LIMITED (SGX:AP4)

Riverstone - Tailwinds Subsiding

  • Riverstone’s 2Q21 net profit came in at RM518m (-0.9% q-o-q), above expectations, as volume weakness was offset by ASP growth. See Riverstone's announcements.
  • Riverstone is more resilient vs peers amid 3Q headwinds, given pricing stability from cleanroom segment and limited production located in EMCO areas.
  • Back-loaded dividend payout for FY21F likely to be key support for Riverstone's share price. 50% dividend payout ratio assumption points to 13.4% dividend yield. Reiterate ADD.


2Q21 a strong quarter for Riverstone

  • Riverstone (SGX:AP4)’s 2Q21 net profit of RM518m (-0.9% q-o-q, +470% y-o-y) was above expectations; 1H21 net profit made up 78% of our previous FY21F forecast. The slightly weaker sales sequentially (-4.4% q-o-q) was mainly attributable to a ~10% volume decline, partially offset by higher ASPs in both its healthcare and cleanroom segments.
  • Volume impact stemmed from:
    • a 60% manpower limit imposed since Jun as part of COVID-19 controls in Malaysia and
    • shipping delays.
  • A RM0.10 dividend per share was declared (+150% y-o-y) by Riverstone.


Continued strength in cleanroom segment

  • Demand for cleanroom fruit in the coming years as sticky as Riverstone deals directly with end-customers.
  • Management plans to increase its profile of the company.


Healthcare glove ASPs on a downtrend

  • Meanwhile, healthcare glove ASPs have peaked; we expect 3Q21F ASP to fall ~40% q-o-q.
  • We expect sequentially weaker results for the segment going forward, due to:
    1. lower production volume (ongoing capacity constraints), and
    2. lower ASP.
  • The steeper-than-expected Riverstone's management remains confident that it can uphold healthy Platinum standard (highest rating) wins recently.


Reiterate ADD on Riverstone with lower target price






ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-08-06
SGX Stock Analyst Report ADD MAINTAIN ADD 1.400 DOWN 1.800



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