Riverstone

Riverstone: Maybank-KE hosted a non-deal roadshow (NDR) for Riverstone after its 3Q15 results, which was attended by institutional clients. Overall, the clients were impressed by Riverstone’s strong earnings growth and its continued dominance in the high ASP, high margin cleanroom glove segment.

While the demand for cleanroom glove in China has slowed down, increased orders from Vietnam and Japan more than offset this. Management highlighted that its cleanroom gloves for mobile devices will be the key growth area, while HDD segment will remain stable.

Its newly-developed chemical-free gloves are slowly replacing the more inferior polymer and cotton coated gloves. Riverstone has customised this product to cater to customers’ need to reduce product corrosion.

The group is also in discussion to supply its product to Samsung in Vietnam, which has a sizeable factory with 30-40k employees. To address competition in the healthcare glove segment, Riverstone will continue to focus on product customisation and quality-conscious customers. The group also aims to expand its US market.

Maybank-KE expects strong earnings momentum to continue from favourable currency and strong demand for new capacity. Riverstone has secured positive orders for its phase 3 expansion, and is set to commence full operations in 3Q16. In addition, investors are excited about Riverstone’s 1-for-1 bonus issue and agree that better liquidity should help Riverstone to close its valuation gap with peers.

At the current price, Riverstone trades at 21.2x forward P/E.

Maybank-KE has a Buy call and raised its TP to $2.60 from $2.36.