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DBS upgrades Riverstone to 'buy', lowers target price


DBS Group Research has upgraded Riverstone Holdings to "buy" from "hold" and lowered its target price to S$1.85 from S$2.03.

This comes as the Malaysian glove maker's valuation becomes attractive again after share price correction on vaccine news, DBS said in a research note on Monday.

DBS analyst Ling Lee Keng said that Riverstone is now trading at an attractive fiscal 2021 price-to-earnings (PE) ratio of 7.3 times, near the minus-one standard deviation of its five-year PE average.

"Furthermore, we also expect a bumper dividend for FY2020," she added.

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The research team previously downgraded Riverstone in November 2020 when the share price was near S$2. Since then, the share price has corrected by close to 50 per cent, Ms Ling said.

She expects a firm average selling price on the back of strong demand and tight supply. The ASP for both healthcare and cleanroom gloves has increased by about 10 per cent month on month on average since April 2020.

Order visibility has also been further extended to December 2021, from June 2021 previously in DBS's November 2020 update.

Even with the Covid-19 vaccine's availability, demand is not expected to taper off immediately as hygiene is still a key concern, Ms Ling added.

Moreover, the mass availability of vaccines will take time, and the new Covid-19 strain raises risk.

Low vaccine acceptance rates or distribution delays due to production or logistical difficulties could delay the return to normalcy.

Shares of mainboard-listed Riverstone closed at S$1.39 on Monday, up S$0.04 or 3 per cent.

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