Riverstone

Riverstone: 2Q15 results topped estimates as net profit surged 68.1% y/y to RM27m. This elevated 1H15 earnings to RM53.9m, making up 58% of full year consensus estimate.

For the quarter, revenue expanded 33.2% to RM129m, fuelled by stronger demand for cleanroom and healthcare gloves.

Operating expenses were trimmed by 10% to RM6.9m, largely due to a RM1.5m FX gain (2Q14: RM-0.8m) and lower R&D expenses (-18.6%), but partially offset by a 31.7% hike in general expenses arising mainly from payroll cost.

Consequently, EBIT margin improved 5.3ppt to 25%.

Notably, the group continues to generate strong operating cash flow, strengthening its net cash position to RM95.9m (FY14: RM79.4m), while remaining debt-free.

Management has declared an interim DPS of 2.4sen, slightly higher than the 2.35sen paid a year ago.

Maybank-KE is optimistic about the group’s outlook amid tailwind from a strong USD/MYR exchange rate, although material prices may inch up marginally.

In addition, the house notes that Riverstone’s annual capacity expansion of 1b gloves should start contributing in Aug’15 and commence full production in Oct ’15. This is slightly ahead of schedule and should contribute an additional month of revenue.

Maybank-KE has a Buy call with TP of $2.05, premised on 18 FY16 P/E, on the rubber glove manufacturer.