Rubber Gloves: As part of its expansion plans, Riverstone has awarded RM15.8m contract to a company for the construction of a new glove factory building (Phase 3) at Taiping, Perak, Malaysia. Construction is expected to be completed by 2Q16 and can potentially increase production capacity by ~1b gloves.
Just yesterday, Maybank-KE reiterated its Buy call on the rubber glove maker and raised its TP to $2.05 from $1.78, after rolling its valuation to 18x FY16 P/E. The house expects Riverstone to be a beneficiary of the stronger USD, which has strengthened against MYR (+12.7% y/y, +0.7% q/q) in 2Q15.
According to Transparency Market Research, the global disposable gloves market is forecast to grow at 6.2% CAGR from 2013-2019 to reach US$7.9b. As such, Malaysia’s rubber glove industry could enjoy positive upside from the global healthcare market, given that it accounts for more than 50% of global demand.
With the bulk of global sales for rubber gloves denominated in USD, export-oriented glove manufacturers are expected to benefit from the depreciating ringgit against the greenback.
Year-to-date, Riverstone’s share price has jumped 65% and currently trades at 20x trailing P/E and 4.2x P/B. Investors who have missed the Riverstone run may consider its smaller peer UG Healthcare, which was listed in Dec ’14, and currently trades at 12.2x trailing P/E and 1.7x P/B.
Market Insight had earlier this week added UG Healthcare to its Growth portfolio, with an entry price of $0.265.
No comments:
Post a Comment