Riverstone

Riverstone: 1Q15 results thrashed street estimates, as net profit jumped 68.6% y/y to RM27m on stronger than expected ASP and margins.

Revenue increased 44.8% to RM127.2m, from increased volume and stronger ASP (+5.6%) also helped. ASP strength was from the USD, which appreciated 10% y/y against the RM, as well as increased contribution from higher margin cleanroom gloves

Favourable product mix, coupled with lower butadiene (key raw material) costs helped gross margin to expand 0.9ppt to 31.6%

Bottom line was also aided by a net FX gain, which drove other operating income to RM1.7m. This contrasted last year where net FX loss resulted in other operating expenses of RM0.9m.

Riverstone’s Phase 2 expansion is on track to start contributing in 3Q15. This will add 1b of capacity to the current 4.2b p.a.

Riverstone is currently trading at 12x FY15e P/E, which Maybank-KE says this is undemanding, citing Riverstone has the strongest EPS growth prospects and ROE amongst peers, which are on average trading at 20x FY15e P/E.

Maybank-KE maintains Buy on Riverstone with TP increased to $1.78 from $1.48.