theintelligentinvestor
Reply to clim : Yeah, the initial question from sporeshare is which counter has good earnings power
theintelligentinvestor
looking through their financial nos for the past few years. They are expanding and doing very well in terms of overall Total Revenue has been consistently increasing at a Compounded Annual Growth Rate of 13.96% a double digits grow of Gross revenue which is considered very good.
Gross Profit has been constantly increasing at a Compounded Annual Growth Rate(CAGR) of 20.4% from RM97.8m to RM197.8m. Gross profit margin has been maintaining above 20% at 24.2%. This is rather healthy and superb for a growing company.
Net Profit amount has been generating a high end double digits percentage of Average 18.6%.
Super Healthy Cash flow generation for the past few years as can be seen from the financial results the Ops cash flow activities has been increasing from RM80.2m to RM145.7m.
The company has a robust balance sheet of which the total borrowing is about RM25M, Cash on hand is RM114.25m, a net net position company with net cash position of RM89.25m.
Next on to their efficiency. Riverstone's return on assets (ROA) and return on equity (ROE) have maintained well from 2013 to 2017. In fact, I looked at their past trend these two return Metrics and they have maintained well at current levels of ROA (above 13%) and ROE (above 20%). We must realise that it is not easy to maintain the ROA and ROE in any business while it is growing it's assets and shareholders' equity through time. To be able to maintain the same level or even increase the level of ROA and ROE would mean the business has high efficiency. Riverstone just demonstrated their high efficiency in their businesses. If they can continue to maintain these same levels of returns, I will be even much more impressed with them.
Competition • Cleanroom: Continue to target new markets and customers •
Continues to be in expansion mode driven by growth in both clean room and healthcare gloves – 36.8% increase in production capacity by end 2019 to 10.4 billion pieces of gloves
The current price of $1.02 is approaching the fair value of $1.06. Giving the fact that the company is growing and has been consistently increasing their total gross revenue and net profit level. looks like it may trade well above the fair value of $1.06.
Is hard to debate how many discount factor percentage to use to calculate the intrinsic value. For this healthcare related company, rolling EPS of 5.7 cents, PE of 17.7 times seems quite attractive. Pls dyodd.
not a call to buy or sell.
Reply : Don't take this as detailed analysis, just my 2c.
1) ROE > 20% for the past 5 years
2) CAGR 2013-17 - Revenue 23%, Earnings 22, Equity 18%. Healthcare glove expected to grow at 8-12% in the next 3 years.
3) Debt - CR 3, Debt/Eq 4%
4) Smallest among the 5 glove manufactures, but their EBIT is clearly superior, ie 2-4x of the other 4, Hartalega, Top Glove, Kossan & Supermax.
5) Lastly, as compared to the others in the list. Riverstone product has a bigger global market than the other that are more local or within regional.
2) CAGR 2013-17 - Revenue 23%, Earnings 22, Equity 18%. Healthcare glove expected to grow at 8-12% in the next 3 years.
3) Debt - CR 3, Debt/Eq 4%
4) Smallest among the 5 glove manufactures, but their EBIT is clearly superior, ie 2-4x of the other 4, Hartalega, Top Glove, Kossan & Supermax.
5) Lastly, as compared to the others in the list. Riverstone product has a bigger global market than the other that are more local or within regional.
SSJ4
Reply to theintelligentinvestor : hi tii, do u feel the pe is a tad high now?
theintelligentinvestor
Reply to @SSJ4 : Yes.
If you have noticed, I am not invested in Riverstone. Most boxes are checked, but the last & most important one (price) has not. :)
Riverstone - Riverstone Holdings Limited, an investment holding company, manufactures and distributes cleanroom and healthcare gloves under the RS brand. It also produces cleanroom finger cots, packaging bags, face masks, and wipers; and other consumables, such as hair nets, static dissipative shoes, safety booties, shoe covers, ESD rubber bands, sticky mats and rollers, swab-polyester and microfibers, antistatic gloves, static dissipative shoes, cleanroom coveralls, and cleanroom papers. In addition, the company trades in latex products; and distributes cleanroom products. Further, Riverstone Holdings Limited offers healthcare products comprising white, blue, black, and accelerator nitrile exam gloves. Its products are used in the hard disk drive, semiconductor, and healthcare industries. The company exports its products primarily to the Americas, Asia, and Europe. Riverstone Holdings Limited was founded in 1989 and is based in Singapore.
looking through their financial nos for the past few years. They are expanding and doing very well in terms of overall Total Revenue has been consistently increasing at a Compounded Annual Growth Rate of 13.96% a double digits grow of Gross revenue which is considered very good.
Gross Profit has been constantly increasing at a Compounded Annual Growth Rate(CAGR) of 20.4% from RM97.8m to RM197.8m. Gross profit margin has been maintaining above 20% at 24.2%. This is rather healthy and superb for a growing company.
Net Profit amount has been generating a high end double digits percentage of Average 18.6%.
What a spectacular achievement. The Net profit amount has seen a great improvement of RM58m from 2013 to RM 129.3m in 2017. It is growing at a CAGR of 24.58%. I would say is an outstanding achievement.
Super Healthy Cash flow generation for the past few years as can be seen from the financial results the Ops cash flow activities has been increasing from RM80.2m to RM145.7m.
The company has a robust balance sheet of which the total borrowing is about RM25M, Cash on hand is RM114.25m, a net net position company with net cash position of RM89.25m.
Next on to their efficiency. Riverstone's return on assets (ROA) and return on equity (ROE) have maintained well from 2013 to 2017. In fact, I looked at their past trend these two return Metrics and they have maintained well at current levels of ROA (above 13%) and ROE (above 20%). We must realise that it is not easy to maintain the ROA and ROE in any business while it is growing it's assets and shareholders' equity through time. To be able to maintain the same level or even increase the level of ROA and ROE would mean the business has high efficiency. Riverstone just demonstrated their high efficiency in their businesses. If they can continue to maintain these same levels of returns, I will be even much more impressed with them.
ROA - is a measure of company profitability relative to total assets. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total assets over a twelve months period.
ROE - is a measure of company profitability relative to total equity. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total equity over a twelve months period.
Investor would be pleased to know that they are able to constantly increasing the paying out of the dividend over the past years as reflected on the chart below. This is a plus factor and a very pleasing way of rewarding the investor.
OUTlook:
Phase 4 expansion is now completed with seven production lines fully commissioned, bringing the Group’s total annual production capacity to 7.6 billion gloves
Phase 5 expansion is now underway with an additional 1.4 billion pieces to ramp up total annual production capacity to 9.0 billion pieces by end FY2018
Phase 6 expansion to add another 1.4 billion pieces by end FY2019 to 10.4 billion pieces in total annual production capacity
Non-HDD markets for cleanroom gloves as well as US and Japan markets for both cleanroom and healthcare gloves continue to gain traction
Continue to tap on fast-growing markets for healthcare gloves
Key Challenges
Competition • Cleanroom: Continue to target new markets and customers •
Healthcare: Focus on customised and premium products Increase in costs such as raw material, labor, and fuel •
Automation • Improve productivity using Lean Six Sigma • Reduce changeover time by installing an additional line
Investment Merits:
Continues to be in expansion mode driven by growth in both clean room and healthcare gloves – 36.8% increase in production capacity by end 2019 to 10.4 billion pieces of gloves
Resilient balance sheet with net cash position with continued ability to generate positive operating cash flow
Consistent dividend payout since listing
Committed management team
I have roughly workout the intrinsic Ops Cash flow value of $1.25 taking into consideration the CAGR of 16.14%. Discount factor of 4%.
Let factor in the further discount of 0.85 X $1.25 = $1.06.
Dividend of 2.3 cents p.a. Yield is about 2.25%( current price of S$1.02).
NAV of S$0.282.
The current price of $1.02 is approaching the fair value of $1.06. Giving the fact that the company is growing and has been consistently increasing their total gross revenue and net profit level. looks like it may trade well above the fair value of $1.06.
I think if there is any further weakness in price, i may consider to slowly accumulate.
Might be anything between 80-90 cents..That may provide a bigger Margin of Safety.
Is hard to debate how many discount factor percentage to use to calculate the intrinsic value. For this healthcare related company, rolling EPS of 5.7 cents, PE of 17.7 times seems quite attractive. Pls dyodd.
Let say the average PE for a healthcare related company might be trading around PE 22 times. We would have come out a Target Price of $1.25.
not a call to buy or sell.
dyodd.
