Riverstone Holdings

[(cy)]

in fact, if you study the analyst reports published on the various glove manufacturers, it is quite evident that ASPs for healthcare gloves have been on a gradual decline but this is compensated by the low raw material prices (latex and butadiene) hence the glove manufacturers are able to sustain their profit margins.

while the other glove manufacturers are expanding aggressively, Riverstone is probably the only one that adopts a two-pronged growth approach through its mainstay cleanroom gloves and healthcare gloves segments. they are in fact the market leader when it comes to the Class 10/100 cleanroom gloves that are typically used by HDD, HDD components and semi-conductor manufacturers with a market share of 60% worldwide. in addition, they are also venturing into the cleanroom gloves segment for mobiles, tablets and LCD panels. it is also worth noting that the barriers of entry for cleanroom gloves are much higher than healthcare gloves due to more manufacturing processes involved and also control of properties such as electrostatic discharge, ionic and particles count.

from my understanding, the other glove manufacturers are focused on the more commoditised healthcare gloves segment which is the fast-growing segment but commands lower gross margins.

[CityFarmer]

in fact, if you study the analyst reports published on the various glove manufacturers, it is quite evident that ASPs for healthcare gloves have been on a gradual decline but this is compensated by the low raw material prices (latex and butadiene) hence the glove manufacturers are able to sustain their profit margins.

Base on my understanding on most listed M'sia glove maker reports, the glove ASP is also declining, which consistent with your view. Low material cost and RM, aren't sustainable over longer term, while ASP will likely continue its downtrend, IMO.

while the other glove manufacturers are expanding aggressively, Riverstone is probably the only one that adopts a two-pronged growth approach through its mainstay cleanroom gloves and healthcare gloves segments. they are in fact the market leader when it comes to the Class 10/100 cleanroom gloves that are typically used by HDD, HDD components and semi-conductor manufacturers with a market share of 60% worldwide. in addition, they are also venturing into the cleanroom gloves segment for mobiles, tablets and LCD panels. it is also worth noting that the barriers of entry for cleanroom gloves are much higher than healthcare gloves due to more manufacturing processes involved and also control of properties such as electrostatic discharge, ionic and particles count.

from my understanding, the other glove manufacturers are focused on the more commoditised healthcare gloves segment which is the fast-growing segment but commands lower gross margins.

I agree Riverstone has a better position with its strategy, thus the focus is on Riverstone, besides Hartalega in Bursa. I agree Riverstone is a leader for cleanroom, but cleanroom glove is a cash cow, and healthcare glove is the star i.e. the future growth. I don't know how soon the cash cow will run out, but star is the hope It is where most of the growth comes from.

(sharing view, and not vested)

[(cy)]

Slow and Steady, but Boring

For VBs who are interested to know more about Riverstone, you may like to view the corporate video in the youtube
https://www.youtube.com/watch?v=ELoYVhUYMJ0
https://www.youtube.com/watch?v=gOTh-LKUPKc

There is a good writeup on Fool Singapore.
http://www.fool.sg/2015/03/13/6-interest...ny-part-1/

The Sector Connect seminar was held in 2013, its information though out-dated are insightful, covered in youtube in 3 parts
https://www.youtube.com/watch?v=ZsRY1Bh-OBw

Of particular interests is that the new manufacturing site in Taiping, will be developed over 5 phases, averaging 1 billion gloves capacity increase per phase. Currently at Phase 2, taking production capacity to 5.2 billion by this year end. We are looking at another potential 3 billions in the near future if Riverstone is successful in capturing more customer orders. In management words, considering that they are only 5 years into premier healthcare sector and newly moving in cleanroom gloves for mobile and tablet industry, there are greater opportunity to grow, of growth that are sustainable.

The two glove leaders are Top Glove and Hartalega. Compare share price performance for the last 12 months, Riverstone fared better than these two competitors. Top Glove has just recently announced improved results due to expanded capacity, lower rubber materials cost (both natural rubber and nitrile latex) and strengthening USD billings against MYR costs. (Business Times 19 Mar 2015) Is it not unreasonable to expect an equally if not better improved results for Riverstone (Qtr 1 2015)?

(vested)

in fact, if you study the analyst reports published on the various glove manufacturers, it is quite evident that ASPs for healthcare gloves have been on a gradual decline but this is compensated by the low raw material prices (latex and butadiene) hence the glove manufacturers are able to sustain their profit margins.

Base on my understanding on most listed M'sia glove maker reports, the glove ASP is also declining, which consistent with your view. Low material cost and RM, aren't sustainable over longer term, while ASP will likely continue its downtrend, IMO.

while the other glove manufacturers are expanding aggressively, Riverstone is probably the only one that adopts a two-pronged growth approach through its mainstay cleanroom gloves and healthcare gloves segments. they are in fact the market leader when it comes to the Class 10/100 cleanroom gloves that are typically used by HDD, HDD components and semi-conductor manufacturers with a market share of 60% worldwide. in addition, they are also venturing into the cleanroom gloves segment for mobiles, tablets and LCD panels. it is also worth noting that the barriers of entry for cleanroom gloves are much higher than healthcare gloves due to more manufacturing processes involved and also control of properties such as electrostatic discharge, ionic and particles count.

from my understanding, the other glove manufacturers are focused on the more commoditised healthcare gloves segment which is the fast-growing segment but commands lower gross margins.

I agree Riverstone has a better position with its strategy, thus the focus is on Riverstone, besides Hartalega in Bursa. I agree Riverstone is a leader for cleanroom, but cleanroom glove is a cash cow, and healthcare glove is the star i.e. the future growth. I don't know how soon the cash cow will run out, but star is the hope It is where most of the growth comes from.

(sharing view, and not vested)

well agreed on the points made. don't think any shareholders or investors can complain since the company is delivering record results quarterly and ever higher share price!

[Bubbachuck]

7 Reasons Why Riverstone Holdings Limited Can Continue Being a Wonderful Investment


Source: http://www.fool.sg/2015/05/12/7-reasons-...nvestment/

Gloves maker Riverstone Holdings Limited (SGX: AP4) has been a wonderful winner in our local share market since its listing on November 2006. At S$1.30 currently, Riverstone’s share price has climbed by more than 300% since closing at S$0.315 on its first day of trading.

In comparison, the Straits Times Index (SGX: ^STI), Singapore’s market benchmark, has gained “just” 135% over the same timeframe.

This raises the question: Can Riverstone continue being a great investment? It won’t be an easy question to answer, but some clues can perhaps be gleaned from the quality of the company’s business, keeping in mind the idea that it’s the performance of a share’s business which ultimately dictates its price over the long-term.

Checking on quality

A useful tool to help us dig into the quality of a business would be a nine-point checklist that was developed by investor and author Pat Dorsey.

The checklist, which is found in Dorsey’s book The Five Rules for Successful Stock Investing, is meant to help quickly sift out companies which might be worthy of a deeper study by investors. It contains the following nine criteria:

1. The firm provides regular financial updates, has a long track record as a publicly-listed entity, and has a market capitalisation that isn’t too small.
2. It has consistently earned an operating profit.
3. It has generated consistent operating cashflow.
4. The firm earns a good return on equity.
5. It has been able to grow its earnings consistently.
6. It possess a clean balance sheet.
7. The firm can generate lots of free cash flow.
8. There are infrequent appearances of one-time charges.
9. There has not been major dilution of shareholders’ stakes in the firm.

Companies which score a “Yes” on all or most of the criteria within the checklist would likely have a quality business. For a deeper look as to why these characteristics make sense in the context of finding a solid business, you can check out my colleague Chin Hui Leong’s three-part series on the subject: Part 1; Part 2; and Part 3.

Some big thumbs up

As a quick introduction, Riverstone is a manufacturer of nitrile and rubber cleanroom gloves as well as premium nitrile gloves that are used in the medical industry. The company currently has an annual production capacity of 4.2 billion gloves and will be adding another 1 billion in capacity by the end of the year.

With all that out of the way, let’s get going with how Riverstone has fared against Dorsey’s criteria.

The company has more than seven years’ worth of history as a publicly-listed company; it has quarterly earnings releases; and it possess a sizeabe market capitalisaion of nearly S$500 million at the moment. These traits would mean that the first criterion would deserve a tick in the box.

Chart 1 below plots the history of Riverstone’s operating income, net income, operating cashflow, and free cash flow from 2007 to 2014. As you can see, the first three financial metrics have been growing steadily through the years while free cash flow has been inconsistent.

With Chart 1’s figures, the hurdles set in criteria 2, 3, and 5 have been handily met. Criterion 7 might deserve a “No” response, but investors should note that Riverstone’s erratic free cash flow is partly a result of the firm spending capital to fund future growth by building up its glove production capacity – that’s a good thing for shareholders if the additional capacity is met by more demand in the future.

Chart 1, Riverstone's operating income, operating cashflow, free cashflow, and net income from 2007 to 2014

Source: S&P Capital IQ

The next chart – Chart 2 – shows Riverstone’s returns on equity and key balance sheet figures for the same time period as above. We can observe that Riverstone has not only managed to generate very strong returns on equity over the years (from 2007 to 2014, the important financial metric has never been below 16.7% and has averaged out at 18.6%), it has also done so with a rock-solid balance sheet that has had either minimal or zero debt.

It’s a noteworthy accomplishment by Riverstone because companies often use leverage to help juice their returns on equity. But as we’ve seen, that’s clearly not the case with the firm.

With that, Criteria 4 and 6 would both deserve a big thumbs up.

Chart 2, Riverstone's return on equity (ROE), total cash, and total borrowings from 2007 to 2014

Source: S&P Capital IQ

We’re down to the last two criteria on Dorsey’s checklist and for the penultimate one, Riverstone manages to shine there too – the firm has not logged any sizeable one-time charges in its income statement for the time period we’re looking at.

Chart 3, Riverstone's share count from 2007 to 2014

Source: S&P Capital IQ

For Dorsey’s last criterion, we can turn to Chart 3, which plots the changes in Riverstone’s share count from 2007 to 2014. The company’s share count has been climbing at an average rate of 2.6% annually over the years – that might not sound like much, but it’s still something for investors to keep an eye on. For that reason, Riverstone would chalk up a “No” on criterion 9.

A Fool’s take: 7 points for a winner

In a tally of the scores, Riverstone has aced seven of the nine criteria in Dorsey’s checklist. This may be taken as a sign that the firm has a good business and thus stands a chance of being a solid investment going forward.

But with that said, investors have to realise that more work needs to be done beyond this before any investing decision can be made – Dorsey’s checklist is meant to help with just narrowing the field.

The quality of a company’s business is just one important piece of the puzzle that’s made up of other equally important pieces like valuation and the firm’s future prospects, amongst others.

[CityFarmer]

The outlook for the company remains rosy among analysts, which I have mostly agreed...

(not vested, and likely have missed a boat again )

Riverstone kept at ‘buy’ by UOB KayHian with higher target price of $1.59

SINGAPORE (May 29): UOB KayHian has raised Riverstone Holdings ( Financial Dashboard)’ net profit forecasts by 4% and 5% in 2015 and 2016 respectively on the back of higher utilisation rates.

It said the specialised glove maker’s average utilisation rate is expected to hover at 90% post Riverstone’s phase two of expansion as production capacity is expected to hit 5.2 billion pieces this year.

“We believe Riverstone is truly growing in stature,” UOB KayHian analysts Bennett Lee and Andrew Chow wrote in a note dated May 27.

The analysts said the risk of overcapacity is low as the group is expanding prudently, and new orders and uptake from existing customers are strong.

They viewed the group positively for its ability to sustain healthy margins and maintain its dominant market share within the high-end cleanroom glove segment.

Furthermore, Riverstone is a beneficiary of a stronger US dollar and higher tax incentives due to rebates from the Malaysian government.
...
http://www.theedgemarkets.com/sg/article...-price-159

[Bubbachuck]

(not vested, and likely have missed a boat again )

The fair value of this company keeps moving forward quarter by quarter. The fair value of today's price might be the bargain price of the future.

[Jacmar]

(not vested, and likely have missed a boat again )

The fair value of this company keeps moving forward quarter by quarter. The fair value of today's price might be the bargain price of the future.

I agree. Look at this road runner reaching all time high of 1.60. To me it has reached fair value now but as you said it could be still a bargain. Up 60% YTD! Latest run contributed by 2 factors:
MERS scare and the USD appreciation. The additional capacity could not come in at a better time. All the glove makers in Malaysia fcsting much better results... Topglove releasing results soon.

Core holdings n holding it tight!

[CityFarmer]

Yes, the price trend has proven me wrong so far, but I am holding tight on my view.

The ASP is falling now on all glove makers. The PnL is good, due to low material cost and lower RM vs US$ now. The ASP trend will continue to go down, with the capacity planned by all players. I will continue to be an observer, till material cost and RM recovered, but companies still profitable.

(not vested, thus might be biased, from a "kaisi" )

[CityFarmer]

The TP from analyst keeps going up... Favorable currency exposure is the key catalyst, as seen by the report below.

I really doubt, the ASP is a up trend, in near future, even for Riverstone.

(not vested)

Riverstone kept at ‘buy’ with target price of $2.05 by Maybank Kim Eng

SINGAPORE (June 17): Glove maker Riverstone Holdings ( Financial Dashboard) is set to enjoy possible gains from a favourable mix of currency exposure.

The Malaysia-based manufacturer incurs between 40 to 50% of its cost in US dollars, but between 70-80% of its revenue in the greenback. In the last quarter, the US dollar has gained 12.7% y-o-y and 0.7% q-o-q versus the ringgit.

According to Maybank Kim Eng analyst John Cheong, every 10% movement in US dollar will translate into net earnings exposure of 3 to 6% for the company, whose headquarters is at Bukit Beruntung in Selangor.

Also, the fatal MERS flubug, while largely contained within South Korea for now, might possibly give Riverstone a lift as well, as an outbreak will drive demand for medical and healthcare products.

“If it does happen, we think Riverstone could book higher average selling prices rather than sales volume, as its entire capacity has been filled,” states Cheong in a June 17 note.

For every 10% increase in healthcare-glove average selling price, Riverstone is set to increases its earnings per share for FY15-FY17 by 3%, writes Cheong, who has a “buy” call and target price of $2.05 on this stock.

Even without the possible increase in demand for healthcare gloves, there is always the steady need for cleanroom gloves, which is seen to account for 68% of the company’s gross profit for FY15.

On June 17, Riverstone shares closed at $1.585, up 3.5 cents. Year-to-date, it is up 62.56%.
http://www.theedgemarkets.com/sg/article...nk-kim-eng

[CityFarmer]

Phase 3 construction started, will complete by 2nd half of 2016, and increase additional 1 billion glove capacity...

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CONSTRUCTION OF PHASE 3 NEW GLOVE FACTORY BUILDING IN PERAK, MALAYSIA
http://infopub.sgx.com/FileOpen/Riversto...eID=356560