Riverstone

Riverstone’s 3Q15 results blew out expectations as net profit more than doubled to RM35.3m. This pushed 9M15 earnings to RM89.3m, achieving 84% of FY15 consensus estimates.

Quarterly revenue jumped 46.7% to RM150.6m, underpinned by stronger demand for cleanroom and healthcare gloves.

Gross margin expanded 6.1ppt to 31.9% as Riverstone benefited from the stronger USD/MYR exchange rate as well as low material prices.

Bottom line was boosted by a RM17.3m FX gain, but partially offset by RM12.5m of fair value loss on derivatives as well as increases in its operating expenses (+67.9% to RM12.2m) on increased business activity.

Notably, operating cash flows grew more than 2.5x to RM54.7m, strengthening its net cash position to RM136.5m. Riverstone has no outstanding debt.

Maybank-KE remains bullish on the counter and notes that new capacity of 1b gloves is expected to contribute more than last year’s addition due to earlier commencement of production in Oct (FY14: Dec).

Riverstone is expected to continue to benefit from the strong USD/MYR, low material prices, and contributions from new capacity. Coupled with a tax benefit of RM3m to be realised in 4Q15, the house is raising its earnings forecasts for 4Q15 as well as the next two years.

Maybank-KE maintains its Buy rating and raises its TP to $2.36 from $2.12. Additional catalysts could come in the form of possible action to boost stock liquidity.