Riverstone chairman/CEO Wong Teek Son (facing camera) and CFO Lim Sing Poew (background, in tie) speak with analysts after 1Q2015 results briefing.
Photo by Leong Chan Teik
Excerpts from analysts' report
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An exceptional 1Q15. Riverstone reported a stellar quarter, with net profit making up 33% of our previous full-year estimate. This was achieved on the back of a 45% YoY growth in total revenue to MYR127.2m in 1Q15 from MYR87.8m in 1Q14, mainly due to an increase in the demand for gloves. As a result, its gross profit rose nearly 50% to MYR40.2m, while NPAT surged 69% YoY to MYR27m. We believe that the stellar quarter was partially aided by increased sales and a margin expansion in the cleanroom segment.
Expansion plans are in line. Phase 2 of Riverstone’s production rampup at its new Taiping plant could be completed by the end of FY15, which would bump up its full annual capacity to 5.2bn pieces. Management expects its Phase 2 ramp-up process to cost MYR50m. We expect the company’s clean room and healthcare gloves to evenly contribute to its topline in FY15, while production could be split into 30% for clean room and 70% for healthcare gloves.
Maintain BUY, with a higher TP of SGD1.54. We continue to expect positive quarters ahead for Riverstone in FY15. As a result, we raise our FY15 earnings estimate by 15%, resulting in a higher TP of SGD1.54 (from SGD1.35), pegged to a 16.3x FY15 peer average P/E. In addition, it continues to generate positive operating cash flow each quarter, which points to a strong balance sheet with a net cash position of MYR96.8m, compared with MYR79.4m at 31 Dec 2014.
This amount is well in excess of the level that could support the company’s existing capacity expansion plans without the need to raise any debt at all in the near future. However, we do note that the fluctuation of the USD plays an important role in our estimates, and any depreciation of the USD would have a negative impact on Riverstone’s NPAT.
Full-report here.
