- Many investors learnt of cleanroom gloves for first time & Riverstone’s dominance of this lucrative segment.
- We remain optimistic. Customised healthcare gloves for quality-conscious customers should remain competitive too.
- Maintain BUY & SGD1.21 TP, at 15x FY15E EPS. Catalysts from higher-than-expected cleanroom glove volume.
We hosted Riverstone to an NDR with institutional clients in Malaysia. Most were already familiar with the healthcare glove industry and showed keen interest in Riverstone’s dominance of the high-end cleanroom glove market. Management shared that its close relationships with end-users via direct supplies, ability to customise solutions, best-in-class product features and stringent qualification formed strong barriers to entry. Better-than-expected penetration of the equally profitable lower-end cleanroom glove market is expected to boost its growth. This could provide upside to our forecasts.
Healthcare segment to thrive
At a time of aggressive capacity expansion by all the major healthcare glove makers in Malaysia, management believes it can sustain its ASPs and margins through: 1) constant customisation and innovation to offer product differentiation; and 2) serving quality rather than cost-conscious customers. Higher elongation gloves for better comfort and low-chemical-content gloves that reduce
allergic reactions are examples of its differentiated products. Undervalued with strong catalysts
Riverstone’s 12x FY15E EPS trails peers’ 15x average, although it is has the strongest EPS growth prospect. Maintain BUY with SGD1.21 TP, at 15x FY15E EPS, on par with the peer average. We expect catalysts from better-than-expected cleanroom glove volume, with higher ASPs and margins.
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