Growth Story Of Riverstone (AP4)
Growth Story Of Riverstone (AP4)

The Business

Riverstone is in the business of manufacturing cleanroom gloves for electronic industry and medical gloves for the healthcare industry. As of 2018, 94.5% of revenue was generated from Nitrile gloves.

A quick search will provide insights on the different types of gloves. Nitrile gloves are made out of synthetic rubber and 3 main advantages of using Nitrile gloves as compared to latex gloves would be better chemical resistance, better puncture resistance and lower allergy rate.

The business of Riverstone is fairly easy to understand, where it manufactures and sells gloves to its customers. The demand for gloves is recurring in nature and have a healthy growth rate of 8% per annum for healthcare gloves. This provides a sustainable demand for gloves produced by Riverstone and potential growth opportunities.

Gloves are in a commoditized market, where users are unlikely to be concern about the brand of the gloves they are using. Coupled with the competitive nature of the glove manufacturing market, Riverstone will unlikely be able to rise prices higher than its competitors. We would expect the competitors of Riverstone will have similar Gross Profit Margin, and efficiency is key for Riverstone in improving its financial performance.

5 Years expansion plan

Riverstone announced a 5-year expansion plan in FY2014, as of FY2018 annual report, the 5th phase of expansion plan has been completed and annual production capacity is now 9.0 billion gloves. The total capacity have increased from 114% in 5 years from 4.2 billion in 2014. Below will be the production capacity growth trend in the past 5 years:

Riverstone production capacity trend

Consistent Revenue Growth

Revenue have also experienced an upward rise across the years as revenue increase. In FY2019, it is expected that total production capacity further increases and based on historical track record, Riverstone have shown the ability to translate the increase in capacity into revenue. Note that there is a decrease in Gross Profit Margin over the years from a high of 31% to 20%. This can be due to an increase in competition or change in product mix, from selling more gloves to the medical segment as compared to the electronics segment.

Riverstone revenue and gross profit margin trend
^ Revenue projection by based on projection growth rate and change in product mix.

Segmental Breakdown

Riverstone revenue by geographical locations
Riverstone revenue by geographical locations

From the segmental breakdown, 3 main geographical locations where Riverstone generates revenue are from Europe, Malaysia and USA. Note that USA is a key contributor for Riverstone revenue growth as the proportion of total revenue increase steadily across the years, 20% of total revenue as of FY2018. It will be expected that USA will continue to provide growth in FY19.

Strong Balance Sheet

Riverstone is in a net cash position, where it funds its expansion plan internally. Inventory remains approximately 10% of total asset from 2014 to 2018. Inventory Turnover ratio (FY18: 9.1x) and account receivable turnover ratio (FY18: 6.9x) have both improved across the years. This would mean that the firm is able to move inventory despite the increase in production capacity. An improved account receivable would also mean that the firm will be able to collect its receivables in a timely manner.

Return on Asset (ROA) remains above 10% across the years and Return on Equity (ROE) remains near 20% across the years with a downward trend from FY2015 of 29.7% to FY18 19.3%, mainly due to a decrease in profit margin. The high ROE is impressive considering the low financial leverage Riverstone uses.

Peer Comparison

Currently, there are 3 glove manufacturers in SGX, being Riverstone, Top Glove and UG healthcare. Below will be the key financial ratios for comparison.

  TEV/EBIT P/BV LTM LTM Net Income Margin % LTM ROE (%)
Supermax Corporation Berhad (KLSE:SUPERMX) 12.5x 2.1x 8.19% 11.00%
Hartalega Holdings Berhad (KLSE:HARTA) 31.6x 7.8x 16.13% 21.40%
Top Glove Corporation Bhd. (KLSE:TOPGLOV) 28.3x 12.4x 8.13% 16.60%
UG Healthcare Corporation Limited (Catalist:41A) 17.0x 0.8x 3.78% 6.80%
Riverstone Holdings Limited (SGX:AP4) 13.2x 2.8x 13.53% 18.40%


Below will be a short summary of Riverstone Holdings.

Key Statistics
Current Price0.935
Market Cap.692.91M

Some key projections for FY19:

  • PE – 18
  • ROE – 19%
  • GPM – 19%
  • Rev. Growth – 15%


  • Track record of growth
  • Net cash position
  • High ROE, ROA


  • Spike in raw material prices
  • Rising operating costs
  • Weakening of USD and strengthening of MYR

The price of Riverstone have fallen by 21.4% YTD, showing signs of recovery in June 2019. As of time of writing, noted a spike in volume on 21 June 2019 of 559k, above its average volume of 302k. This would present an opportunity to purchase shares in Riverstone with a fantastic track record and potential growth in the subsequent years.

Note: currently am not vezted in Riverstone(SGX:AP4).

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