On 6 August 2024, Riverstone Holdings Limited (“RS”) announced their half year results for FY2024. They have been able to generate significantly higher profits than the previous financial year, due to recovering demand for both cleanroom and healthcare gloves. They have no external borrowings to fund their operations, which translate to their low gearing and high net cash position.
RS has strong competitive advantages where they provide cleanroom gloves to protect semiconductor products from contamination, corrosion and electrostatic discharge (“ESD”), as well as healthcare gloves which gives users a protection barrier against biohazards whilst performing general medical practices. This has allowed RS to grow as both industries became more prevalent in the current market.
This is the first article covering RS and therefore there are no comparatives.
Website: Financial Statements and Related Announcement::Second Quarter and/or Half Yearly Results
Website: General Announcement:: Corporate Presentation 1H2024
Background
Riverstone Resources is established in year 1989, and still growing in their industry. With a history spanning close to 30 years, Riverstone has accumulated a huge network of stakeholders and expertise in their making. Being one of the leading manufacturers of cleanroom and medical industry, they manufacture top of the line healthcare gloves, nitrile gloves, finger cots, face masks, packaging bags etc.
Their products are widely qualified and used in the Hard Disk Drive (HDD), semiconductor and healthcare industries in Malaysia. On top of the achievements, Riverstone exports their products to key high technology countries around Asia, Europe and the American region.
Riverstone has been growing extensively, for the amazing recognition for their products around the world. To cope with growing demands, they have increased their capacity by setting up a new manufacturing plant in Thailand in year 2001, and another one in Wu Xi China in year 2004. Later in year 2010, they built a new plant in Taiping, equipped with only state of the art manufacturing facility to keep their promises for premium quality.
Financial Highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | +7.4% | No Comparative |
Revenue for the first half of FY2024 increased by 7.4% to MYR496 million from MYR462 million for the same period in the previous financial year, primarily fueled by recovering demand for both cleanroom and healthcare gloves. Overall, the revenue metric is Favorable.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | +54.7% | No Comparative |
The earnings per share for the first half of FY2024 increased impressively by 54.7% to MYR0.0976 per share as compared to MYR0.0631 per share in the previous financial year. The increase is more than proportionate than the increase in revenue, due to gross profit increasing by 55.2% driven by a better product mix, higher average selling price, and lower cost of sales during the reporting period. This metric is Favorable and is a good aspect of the dividend stock.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +42.9% | No Comparative |
Cash flow generated from operations in the first half of FY2024 amounted to MYR139 million, an increase by 42.9% compared to MYR97 million for the same period in the previous financial year. The increase was mainly supported by their profit generated during the period, therefore the metrics is Favorable.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | 9.1% | No Comparative |
Gearing ratio stands at 9.1% as of 30 June 2024. This metric is computed using total assets of MYR1,738 million and total liabilities of MYR158 million. The metrics is Favorable as RS is less reliant on external sources to fund operations.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest coverage | 6,562.2x | No Comparative |
The interest coverage stands at 6,562.2 times as of 30 June 2024, using profit before interest and tax of MYR183 million and finance costs of MYR0.028 million. The significantly high interest coverage is due to the Group has no external borrowings, with finance costs arising due to their lease liabilities. The metric is Favorable.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 2.68 | No Comparative |
The Net Asset Value (“NAV”) per share of the Group as of 30 June 2024 stands at MYR1.07 per share. This amounts to SGD0.33 per share when translated at the closing exchange rate of SGD1:MYR3.23 as of 25 September 2024. With a closing share price of SGD0.885 as of 26 September 2024, the Price-to-book (“P/B”) ratio for RS is 2.68. This is Unfavorable as you will be paying a significant premium to its book value.
Website: Yahoo Finance SGD to MYR
Worth nothing that with cash and cash equivalents of MYR761 million and no borrowings, at total ordinary shares of 1,484 million this represents net cash of SGD0.15 per share.
As of 26 September 2024, the Market Capitalization is approximately SGD1,312 million.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 7.23% | MYR 0.205 |
| 2023 | 9.88% | MYR 0.280 |
| 2022 | 19.05% | MYR 0.540 |
| 2021 | 10.58% | MYR 0.300 |
| 2020 | 3.47% | MYR 0.099 |
RS have been paying out dividends consistently since listing with a high payout ratio. Assuming that the payout in December 2024 is similar to their October 2024 payout of MYR0.040, the total expected dividend payout in 2024 will amount to MYR0.245 per share.
Using the closing share price of SGD0.885 as of 26 September 2024 and the closing exchange rate of SGD1:MYR3.23 as of 25 September 2024, this translates to a dividend yield of 8.56%. For my benchmark, a general reasonable yield would be around 5.75%. The dividend yield is thus Favorable.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
Do note that their dividend has been on a downtrend though it is still at a relative high yield. A more conservative estimate may be to assume that RS pays a dividend of MYR0.040 per quarter. When annualized, this amounts to MYR0.160 which translates to SGD0.049 and a dividend yield of 5.59%. This dividend yield would still be reasonable with the recent decrease in interest rates.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +7.4% | Favorable |
| Earnings per share | +54.7% | Favorable |
| Operating Cash Flows | +42.9% | Favorable |
| Gearing ratio | 9.1% | Favorable |
| Interest coverage | 6,562.2x | Favorable |
| Price to Book Ratio | 2.68 | Unfavorable |
| Overall | Favorable |
In conclusion, it is Favorable to invest in RS. With their strong competitive advantages and high dividend payout, this stock is a good option for those considering adding for its stability while capitalizing on the glove demand from the semi-conductor and healthcare industry.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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This is the first article covering RS.
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