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| Riverstone Holdings: Positive operating environment leading to higher ASP and margins DBS Group Research3 Jun 2020 Key summary points
Orderbook is fully locked in and any new demand can only be fulfilled next year, likely in January or February, as the Phase 6 expansion to increase production capacity by 1.4bn (+15.6%) to 10.4bn pieces of gloves per annum is expected to be completed by end of this year. Currently, two out of seven lines are already in production. Moving beyond Phase 6, plans are already underway following the group& rsquo s acquisition of a 3.8-acre land bank in Taiping where Riverstone intends to construct its new facility and expand capacity further. Going forward, higher production capacity should help to drive revenue higher for the group. Higher ASP, in line with market trend. Average selling price (ASP) is also on a rising trend, due to the strong demand and tight supply. The 10-20% increase in ASP is effective in May/June 2020 onwards. We would not rule out further increase in ASP in 2H20. Other players like Top Glove, Hartalega and Kossan Rubber are also raising their ASPs. Margin improvement on higher ASP and lower raw material prices. Besides higher ASP, Riverstone is also benefitting from a lower raw material price environment. The price of butadiene, a key raw material used in the production of its nitrile-based gloves and accounts for c.50% of total costs, has shed 66% YTD. The price of butadiene, a by-product of oil, tends to move in tandem with oil prices. Prices of other raw materials, like nitrile, are also trending down, though not as much as butadiene. Hence, a higher ASP and lower raw material prices would lead to further margin improvement. In 1Q20, which did not benefit much from ASP increase, gross margin had already improved by 4.6ppts y-o-y to 24.0%. We expect further improvement in gross margin to 27.5% for FY20F. Positive demand and supply dynamics. Malaysian Rubber Glove Manufacturers Association (MARGMA) has revised up its estimated export of gloves to c.220bn pieces in 2020, c.20% growth from 2019, amid the current situation. Malaysia is the world& rsquo s largest rubber glove producer and contributes nearly 63% of global supply. The industry is in a tight supply situation, with almost all players running at full capacity. Demand expected to be strong post COVID-19. Post the pandemic, we expect the demand for healthcare gloves to remain strong, as hygiene will still be a keen concern going forward. For the cleanroom segment, we continue to expect new technologies like 5G, Artificial Intelligence, and Internet of Things to drive demand for cleanroom gloves. Revised earnings up for FY20F/FY21F by 30%/41%. We have raised earnings for FY20F/FY21F by 30%/41% on higher ASP and margins. The operating environment has been very favourable for glove manufacturers. The strong demand and tight supply have led to further increase in ASP while the lower raw material prices have further boosted margins. On the back of the higher earnings, our TP is revised up to S$3.09 (previously S$2.20), or PE of 28x (up from 26x, in line with the re-rating of peers) on FY20F earnings, which is at a 30% discount to peers. |
Justice888 ( Date: 05-Jun-2020 10:31) Posted:
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Wonder if Ex Date will have any impact on the price on Monday..
Monday will be a good day💪 💪 💪
Agree. Saw some selling here .. once it is done, RS will play catch up.. . Patience is key. Cheers
hokpin ( Date: 05-Jun-2020 16:44) Posted:
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This counter will follow soon!
Longtermer ( Date: 05-Jun-2020 15:50) Posted:
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All glove companies should be riding this trend. Make lot of profits.. all their next results will be explosive. Vested since this counter is lagging behind.. cheers.
slow and steady up then can play longer until next week ma..Huat ah !!!
hokpin ( Date: 05-Jun-2020 12:53) Posted:
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Haha, all huat ah!
yeey3e ( Date: 05-Jun-2020 09:45) Posted:
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Dont have a heavy lunch folks... otherwise you might fall asleep after lunch and miss the glove party🍾 😜
Move up with UG and TP now. Its time to catch.
wb up ew
now ew 192 221 w2?
w1 29
w2 18 tgt 203
px hit 207 and turn
w3 47 tgt 254
px hit 241 delta 34
now look dangerous because this really look like wb up
w4 13 tgt 228
px hit low 225 and push up to 235
5min chart bollinger 227 231 236
if px break low 225 again bad sign
w5 29 tgt 254
prev high was 246
wa dn 246 192 delta 54
wb up 192 241delta 49
- if wb dont break up 246 then wc continue
wc dn 241 ?187
now ew 192 221 w2?
w1 29
w2 18 tgt 203
px hit 207 and turn
w3 47 tgt 254
px hit 241 delta 34
now look dangerous because this really look like wb up
w4 13 tgt 228
px hit low 225 and push up to 235
5min chart bollinger 227 231 236
if px break low 225 again bad sign
w5 29 tgt 254
prev high was 246
wa dn 246 192 delta 54
wb up 192 241delta 49
- if wb dont break up 246 then wc continue
wc dn 241 ?187
syl0313 ( Date: 05-Jun-2020 10:00) Posted:
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I think what happened this morning at the open shook many people up including me... classic case of manipulation....pump up high...then DUMP....i think many kan cheong spiders must have sold on the cheap...then the BB...scoop up and slowly...push up again....thats why i said it takes BALLZZ of steel to play these glove counters...just my 2c observations....
Whenever price Drop...sure got willing buyers to buy up....POWER💪 💪 💪
Interestingly this Glove counter can use CPF to buy unlike UG and TG😜 ....
I can?t find the report . Can forward me the link ? Thks
stlimst ( Date: 04-Jun-2020 23:07) Posted:
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Vested today.
Ride the Gloves up trend and collect dividend. Cheers..
should be a slow ride up..towards TG' s results on 11/6..next thursday.. still sometime cant be all the way chiong up .. TG also control-play u can tell....up and down ..up and down..RS this morning hit almost recent high ..a bit too much la
Need ballzz of steel to play these glove companies....ha ha
Master Yuan, any update?
SgYuan ( Date: 03-Jun-2020 15:26) Posted:
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Pump and dump
kennethkzy ( Date: 05-Jun-2020 09:55) Posted:
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