Riverstone: CIMB initiates coverage with Buy Call and $0.45 TP. Note that investors remain concerned on overcapacity in the glove industry and good news is that some of the key players are moderating their capacity growth. For Riverstone, Co. is not too worried as its capacity remains manageable and expansion into medical gloves is via its ability and willingness to customise to customers’ requirements.
Going forward, Riverstone is targeting a healthier balance of 50% clean room gloves and 50% healthcare gloves. On the cost side, raw materials costs (mainly nitrile-related) should decrease as more suppliers enter the market. Increase in fuel cost remains manageable and Grp is counteracting some of the cost increase with its own heat generation capability. House projecting 6% div yield over FY11-FY13.