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Tuesday, November 25, 2014

Riverstone kept at ‘buy’ with higher price target of $1.21 by Maybank-Kim Eng


SINGAPORE (Nov 25): Maybank ( Financial Dashboard)-Kim Eng is maintaining its “buy” call on Riverstone Holdings ( Financial Dashboard) with a higher target price of $1.21.

In a Nov 25 report, analysts John Cheong and Gregory Yap said they remain optimistic about the prospects of the company, given that the manufacture of customised healthcare gloves remains a compelling business.

Maybank-Kim Eng recently hosted Riverstone to an non-deal roadshow with institutional clients in Malaysia and many walked away appreciative of Riverstone’s dominance of the high-end cleanroom glove market.

Riverstone’s management also 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 the house forecasts, said the analysts.

At a time of aggressive capacity expansion by all the major healthcare glove makers in Malaysia, Riverstone’s management believes it can sustain its average selling price and margins through constant customisation and innovation to offer product differentiation; and serving quality- rather than cost-conscious customers.

Examples of its differentiated products include elongated gloves for better comfort and low-chemical-content gloves that reduce allergic reactions.

Riverstone’s 12x FY15E EPS also trails peers’ 15x average, although it is has the strongest EPS growth prospect.

“We expect catalysts from better-than-expected cleanroom glove volume, with higher ASPs and margins,” say Cheong and Yap. “Maintain BUY with SGD1.21 TP, at 15x FY15E EPS, on par with the peer average,” they add.

Riverstone is up 1.1% at 97 cents as at 10:08 a.m. local time.

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