Riverstone Holding

UOBKayhian, 11 Sep 2014

FY14F PE (x): 14.4
FY15F PE (x): 12.1
Expansion on track. Management highlighted that its capacity expansion is on track,
with the first phase (consisting of 1.0b gloves per annum) to be completed by end-14.
The first two lines will be commissioned by end-September, whilst the remainder will be
commissioned in the remaining months. The added capacity will boost its production
capacity from 3.2b gloves to 4.2b gloves (+31%) by end-14 but the full impact on
earnings will only be felt in 2015F.
On track to deliver 3-year net profit CAGR of 16%. We project a 3-year net profit CAGR
of 15% in 2013-16. Our model factors in gross margin assumptions of 26-28% to
account for the potential margin impact from the change in product mix. We have also
assumed new borrowings of RM20m annually beginning 2H15 as funding for phases 3-
5 of the group’s new factory.
On our conviction BUY list. We remain bullish with a target price of S$1.14, pegged at
the sector’s historical mean PE of 14x to our 2015F EPS of 8.4 S cents. Valuations are
undemanding at 12x 2015F 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 industry