Fast-growing Riverstone Holdings faces 3 main growth risks
Possible pricing pressure is one.
Riverstone Holdings is seeing booming demand for its cleanroom and healthcare segments, but it remains vulnerable to 3 risks, according to OSK-DMG.
First, it could experience possible pricing pressure arising from its expansion in healthcare glove capacity.
"Riverstone’s European customers are increasingly asking the company to boost capacity to help them diversify their supplier base, which may potentially triple orders," noted OSK-DMG.
"If the company achieves its plan of expanding to an annual production capacity of 8.0bn pieces in FY19, we expect its earnings to grow at a CAGR of 22.4% starting from FY13, up more than 4.1x to MYR163.4m by then," it added.
A second risk for the firm are potential raw material price fluctuations, while its third vulnerability lies in its exposure to forex volatility.
If Riverstone manages to avoid these risks, then Riverstone could be well on its way to joining the the big league, according to OSK-DMG, due to its blistering rates of demand and expansion growth.
Riverstone posts third quarter profit growth as net profit surges 49.3% to RM15.7 million in 3Q2013 • Revenue increases 18.9% to RM94.0 million on expand ed production capacity to meet growing demand for healthcare gloves • Gross profit outpaces revenue growth with 36.8% incr ease to RM26.2 million due to better productivity and favourable raw material prices • Strong balance sheet and net cash position of RM116 .3 million
Riverstone records four consecutive quarters of pro fit growth as net profit surges 46.2% to RM58.0 million in FY2 013 • Revenue increases 15.5% to RM357.9 million • Net cash position of RM114.0 million • Board of Directors recommends a final dividend per share of 4.5 sen (RM) Financial Highlights RM million (Y/E Dec) 4Q2013 4Q2012 Change (%) FY2013 FY2012 Change (%) Revenue 92.7 79.2 17.1 357.9 309.8 15.5 Cost of Goods Sold (66.1) (59.8) 10.5 (260.1) (238.2) 9.2 Gross Profit 26.7 19.4 37.2 97.8 71.6 36.7 Profit Before Taxation 20.2 12.7 58.6 72.6 48.3 50.3 Profit After Taxation 16.0 8.4 90.6 58.0 39.7 46.2 EPS* - basic (sen) 16.02 12.18 EPS # - fully diluted (sen) 16.02 11.72
LOL this DBSVS analyst lack serious understanding of the sector. Bet he didn't even visit the facilities? Riverstone is a decent co with strong mgt team - no doubt. But the entire sector is on hilltop and peak valuation - partly due to forex benefit. Buy call resting on valuation comparisons is simply mental. Why not compare with global (& larger) players like Semperit and Ansell? Both trade only on low teen fwd P/Es.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
390465
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Posted by 390465 > 2013-07-17 15:51 | Report Abuse
stone turn to gold soon.