Hot stock: Riverstone up 8.9% amid heavy trading

SHARES of Riverstone Holdings were up as much as 8.9 per cent to S$0.84 during Thursday’s (Mar 21) earning trading.

The last time the counter closed near the level was on May 4, 2022.

As at 10.33 am, it was trading up 7.8 per cent to S$0.825 with 8.6 million shares changing hands. It stood as the 10th most heavily traded counter on Singapore Exchange.

RHB on the same day upgraded Riverstone Holdings to “buy” from “neutral” on its improving sales volume and above-industry margin profile.

The brokerage is positive that the group will ride on a robust recovery of global semiconductor sales with its unique exposure to the cleanroom segment, on top of benefitting from an increased demand for healthcare gloves.

While expecting the Malaysian glove maker to chart a 23 per cent core profit growth in FY2024, RHB raised its earnings forecast for the year up 12 per cent. It also raised the earnings estimate for FY2025 up 24 per cent. This is to account for improving sales volume with a better product mix that sustains the group’s average selling price (ASP).

The upgrade came with an increased price target to S$0.93 from S$0.74. The target implies an 18 times multiple of the brokerage’s earnings forecast for FY2024, which is 0.7 standard deviation above the pre-Covid five-year mean of 14.8 times.

RHB highlighted that the group is the only Malaysian glove maker that is still posting double-digit core profit margin while continuing its consistent dividend payout. 

Riverstone on Feb 28 posted a 60.7 per cent jump in Q4 net profit, despite a 2.3 per cent decline in revenue. It also proposed a special interim dividend of five sen and a final dividend of 7.5 sen for FY2023, translating to a 151.3 per cent payout ratio.

RHB said the group is in a “sweet spot” to capitalise on the recovery of global semiconductor sales.

“Riverstone is expecting its cleanroom gloves ASP to hold up steadily at US$90 per 1,000 pieces driven by solid customer demand from various technology industries such as hard disk drive, sensor, chip manufacturing, among others.”

In healthcare gloves segment, RHB expects the demand supply dynamics to reach equilibrium by the second half of 2024 as inventory destocking is ending. It added that Riverstone’s focus on high specialtiy products upon revamping its generic production line is also set to sustain its raised healthcare gloves ASP.