Riverstone: Is a beneficiary of the stronger USD, which has strengthened 12.7% y/y (+0.7% q/q) against MYR in 2Q15. With 70-80% of revenues and 40-50% of cost of sales based in USD, Maybank-KE estimates a net earnings exposure of 3-6% for every 10% movement in the greenback.
For now, demand for healthcare gloves has yet to surge due to MERS, as there has not yet been a widespread outbreak. Nevertheless, if this happens, the house opines Riverstone could book higher ASPs rather than sales volume, as its entire capacity has been filled. The house estimates every 10% increase in healthcare-glove ASPS could lift FY15-17e EPS by 3%.
Meanwhile, the upcoming 3Q15 gas-price hike in Malaysia is only expected to impact bottom line marginally, as gas only makes up a tiny fraction of costs, and the company expects this to be partially passed on to consumers.
Maybank-KE maintains its Buy call on Riverstone with TP raised to $2.05 from $1.78, after rolling to FY16e EPS, based on 18x P/E, slightly discounted against a 19x peer average
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