Excerpts from analysts' reports
Maybank Kim Eng analysts: John Cheong & Gregory Yap
Maybank Kim Eng analysts: John Cheong & Gregory Yap
@ Riverstone's newly-opened factory in Taiping, Malaysia. NextInsight file photo.Cleanroom gloves attracted keen interestWe hosted Riverstone to an NDR (non-deal roadshow) with institutional clients in Malaysia.
Most were already familiar with the healthcare glove industry and showed keen interest in Riverstone’s dominance of the high-end cleanroom glove market. Management shared that its close relationships with end-users via direct supplies, ability to customise solutions, best-in-class product features and stringent qualification formed strong barriers to entry.
Better-than-expected penetration of the equally profitable lower-end cleanroom glove market is expected to boost its growth. This could provide upside to our forecasts.
Riverstone CEO Wong Teek Son (in white shirt, holding helmet) speaking with analysts during a recent factory visit. NextInsight file photo.Healthcare segment to thrive
At a time of aggressive capacity expansion by all the major healthcare glove makers in Malaysia, management believes it can sustain its ASPs and margins through: 1) constant customisation and innovation to offer product differentiation; and 2) serving qualityrather than cost-conscious customers.
Higher elongation gloves for better comfort and low-chemical-content gloves that reduce allergic reactions are examples of its differentiated products.
Undervalued with strong catalysts
Riverstone’s 12x FY15E EPS trails peers’ 15x average, although it is has the strongest EPS growth prospect.
Maintain BUY with SGD1.21 TP, at 15x FY15E EPS, on par with the peer average. We expect catalysts from better-than-expected cleanroom glove volume, with higher ASPs and margins.
Maintain BUY with SGD1.21 TP, at 15x FY15E EPS, on par with the peer average. We expect catalysts from better-than-expected cleanroom glove volume, with higher ASPs and margins.
