Brokers’ take: UOBKH ceases coverage on Riverstone in absence of catalysts
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Michelle Zhu
UOB Kay Hian (UOBKH) is ceasing coverage on glovemaker Riverstone Holdings, citing ongoing industry headwinds as well as a lack of immediate and future catalysts.
Its last call on the stock remains at “hold” with a price target of S$0.67.
In a report on Tuesday (Dec 6), the research house said it foresees depressed share price performance and continued headwinds for the group’s healthcare gloves segment until H2 of FY2023 due to an unfavourable demand-supply imbalance.
This comes after Riverstone’s latest Q3 financials missed UOBKH’s expectations as average selling prices (ASPs) and demand for healthcare gloves continued their decline, exacerbated by stiff competition.
“Cleanroom gloves remained resilient in Q3 FY2022 with ASPs holding steady, although demand is expected to soften slightly in Q4 2022 due to the ongoing zero-Covid policy in China,” noted the research team.
UOBKH foresaw “minimal impact” from a global slowdown in semiconductors on cleanroom glove sales volumes due to the group’s diversified portfolio of clients. FY2022-2024 earnings forecasts have nonetheless been reduced sharply to account for lower ASPs and sales volumes.
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Its revenue estimates for the period now range from RM1.3 billion (S$400 million) to RM1.4 billion, versus RM1.4 billion to RM1.9 billion respectively.
The only share price catalyst on the cards for Riverstone for now is the “emergence of a deadly Covid-19 variant”, according to UOBKH.
Shares of Riverstone were trading S$0.01 or 1.6 per cent lower at S$0.63 as at 9.55 am on Tuesday.
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