Background: Riverstone is an established cleanroom and healthcare glove manufacturer with production facilities in China, Malaysia and Thailand. It also produces other cleanroom consumables such as finger cots and face masks.
Recent development: In 3Q11, Riverstone recorded a 29.8% YoY rise in revenue to RM71.0m, attributed to higher production volume from additional production lines. However, gross margins contracted by 9.8ppt YoY, reflecting escalating raw material costs and the depreciating US$.
Key ratios…
Forward price-to-earnings: 8.1x
Price-to-NTA: 1.4x
Dividend per share / yield: (interim) RM0.022 / 2.2%
Net cash/(debt) per share: RM0.10/$0.25
Net cash as % of market cap: 25.5%
Share price S$0.400
Issued shares (m) 317.9
Market cap (S$m) 127.146
Free float (%) 33.6
Recent fundraising activities Aug ’10: 1-for-5 rights issue of 61.9m warrants (issue price S$0.02, ex price S$0.31; 53m outstanding warrants remaining)
Financial YE 31 December
Major shareholders CEO Wong Teek Son (50.6%) ED & COO Lee Kai Keong (13.0%) ED & Grp Bus. Dev. Mgr Wong Trech Choon (4.0%)
YTD change -15.6%
52-week price range S$0.33-0.52
Our view
Reversal of raw material prices and US$. Raw material prices have experienced record-highs in the first half of the year. Since then, prices for nitrile fell by 46% from their peak and latex slipped by 38%. This coupled with a rally in the US$ against the ringgit will be fully reflected in 1Q12.
Quick on its feet. A few of Riverstone’s customers in Thailand, such as HDD maker Western Digital, were affected by the Thai floods and had temporarily suspended orders. The firm was quick to divert its orders to new customers and avoid any excess inventories. Its Thai plant still operates at almost full capacity, accounting for 15.1% of its FY10 revenue.
Steady expansion. Riverstone is expected to record higher production volume from the completion of an additional single line this month. Another single line will be added in 1Q12 to maintain its expansion momentum, bringing its total annual capacity to 2.5b gloves. The company plans to add more lines to its existing factories in the coming year.
Dividends maintained. The company is expected to continue to pay out at least 45% of its profits. According to Bloomberg consensus, the stock is trading at forward PER of 8.1x, largely in line with its competitors’ 9.3x.
No comments:
Post a Comment