Riverstone Holdings

Uobkayhian on 26 May 2014

FY14F PE (x): 13.0
FY15F PE (x): 10.9
An undervalued glove maker trading at an attractive 11x PE vs the sector’s historical
mean of 14x. Its niche in premium-priced cleanroom gloves and customized healthcare
gloves allows for higher margins. Some 5b pieces in new capacity will more than double
production capacity by 2018. Solid balance sheet with no debt and strong cash flow.
Maintain BUY. Target price: S$1.14.
Mid-cap highlight. We outline the key investment highlights for Riverstone Holdings
(Riverstone) as part of our mid-cap strategy. Riverstone specialises in the production of
nitrile gloves. It is the leading global supplier of high-tech cleanroom gloves with an
estimated 60% share in the hard disk drive (HDD) market. It also manufactures
premium customised healthcare gloves. Additionally, the group produces other
cleanroom consumables such as finger cots, packaging materials and face masks.
Currently, Riverstone operates five manufacturing facilities in Malaysia (three), Thailand
(one) and China (one), with a combined annual production capacity of 3.1b gloves.
Undervalued glove maker, BUY with target price of S$1.14, pegged at the sector’s
historical mean PE of 14x to our 2015F EPS of 8.2 S cents. The stock currently trades
at an attractive 11x PE despite the group’s higher margins and comparable ROE vs
peers. Our target PE is also in line with the mean transaction multiple of 13.7x for recent
M&As within the glove-making industry