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Singapore’s Big Winner of the Week: Riverstone Holdings Limited

Glove maker Riverstone Holdings Limited (SGX: AP4) has seen its share price jump by a remarkable 17.2% since last Friday to close at S$1.36 yesterday.

In comparison, the Straits Times Index (SGX: ^STI), Singapore’s market benchmark, had slipped by 1.6% during the same period. This makes Riverstone a big winner in the local share market this week.

Riverstone is involved in the manufacture of nitrile and natural rubber clean room gloves that are used in highly controlled and critical environments such as the electronics industry. It also manufactures premium nitrile gloves for the healthcare industry. Some of the company’s main customers include major hard-disk drive makers like Hitachi, Seagate, and Western Digital.

Earlier in the week on Tuesday, Riverstone had released its financial results for its fiscal first-quarter (the three months ended 31 March 2015) and saw both its revenue and earnings hit record high levels.

Revenue for the latest quarter was at RM127.2 million, up an impressive 44.8% from a year ago. The good showing was “mainly due to the higher gloves demand” after Phase 1 of its capacity expansion came onboard. The first phase saw Riverstone add 1 billion gloves to its annual manufacturing capacity to bring its current production limit to 4.2 billion gloves per year.

The higher top-line, coupled with a stronger gross profit margin (the figure went up from 30.6% one year ago to 31.6% in the first quarter on the back of better product mix and higher sales volume of its products), resulted in a 68.6% year-on-year jump in Riversone’s net profit to RM27 million.

As of 31 March 2015, Riverstone had a cash balance of RM40 million, excluding fixed deposits. This is an improvement from the RM35 million figure seen at the end of last year. What’s impressive is that the company didn’t have any debt to speak of.

The increase in the cash balance was partly due to excellent cash flow production in the reporting quarter; the company ended the quarter with RM26.2 million in operating cash flow, nearly triple the figure of RM9.7 million seen a year ago.

Despite the success seen in the first quarter of 2015, Riverstone’s not resting on its laurels and is working on Phase 2 of its capacity expansion. Wong Teek Son, the company’s Executive Chairman and CEO, elaborated in the earnings release:

“Our second phase of expansion is currently underway and on track for completion by the end of FY2015. Adding another billion glove pieces to our annual production capacity, this will bring our total annual production capacity to 5.2 billion as at 31 December 2015.

Going forward, we acknowledge the increasingly competitive landscape for the glove manufacturing sector and continue to remain cautious about fluctuations in commodity prices and US currency. We are however optimistic about our growth prospects as we continue to focus on our capacity expansion plans and ramp up production to ride on the growing global demand for gloves.”

The glove manufacturer is now trading at 19 times its historical earnings at its closing price on Thursday.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn't own shares in any companies mentioned.