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Riverstone Holdings vs Top Glove: Which Is The Better Buy? (Part I)

Over the last five years, glove-manufacturing businesses have done exceptionally well. In addition to strong growth in demand for healthcare and clean room gloves, favourable foreign exchange rates and low raw material prices have been catalysts to their growth.

With that being said, I want to compare two prominent glove-manufacturing companies listed in Singapore to see which currently makes the better investment.

Introducing the contenders

The two companies I will compare are Top Glove Corporation Bhd (SGX: BVA) and Riverstone Holdings Limited (SGX:AP4).

Top Glove is the largest glove-maker in the world with about 25% of market share. At the time of writing, it has a market capitalization of around S$4.3 billion and produces a whopping 45 billion gloves annually. It supplies to over 2,000 customers across 195 countries.

In comparison, Riverstone is a much smaller player. It has an annual capacity of around 9 billion gloves and a market capitalization of S$718.85 million. However, Riverstone stands out from the rest of the pack due to its expertise in cleanroom gloves, which are used in the production of hard disk and semiconductors. Because of that, it has been able to extract higher margins than its competitors.

Revenue growth

The first metric I want to compare is the revenue growth.

Top Glove has grown its revenue from S$901.6 million in FY2014 to S$1.24 billion over the last 12-month period ended 28 February 2018. That translates to a compounded annual growth rate of 7.4%.

Riverstone Holdings, on the other hand, grew its revenue from S$151 million in 2014 to S$277.8 million over its last 12-month period ended 31 March 2018. That equates to a compounded annual growth of 15.4%.

As shown, over the period under study, Riverstone has managed to grow its revenue at a faster pace than Top Glove.

EBITDA growth

The earnings before interest, tax depreciation and amortisation (EBITDA) is a better metric to compare in this case than profit as it removes any one-off variable tax expense and non-cash flow items such as depreciation and amortisation.

Over the same period, Top Glove has grown its EBITDA from S$105.2 million in FY2014 to S$166.8 million in the last 12-month period. This translates to a commendable 10.7% in compounded growth annually.

At the other corner, Riverstone increased its EBITDA from S$35.3 million in 2014 to S$64.3 over the last 12-month period. This is good for a 15.2% compounded annual growth. Once again, Riverstone comes up top.

Earnings per share growth

The earnings per share growth takes into account any share dilution during the period.

Top Glove has grown its earnings per share from 16 sen in FY 2013 to 30.52 sen in the last 12-month reporting period. That translates to a 13.1% growth over the five-year period.

Riverstone managed a compounded growth of 15.6%, growing its earnings per share from 8 sen in 2013 to 17.1 sen in the last 12-month period. For the third time, Riverstone Holding did marginally better than Top Glove.

The Foolish bottom line

From this exercise, we can conclude that Riverstone has grown at a faster pace than Top Glove over the period under study. However, it is perhaps worth noting that much of Top Glove’s growth has come in the last year and it might perhaps have the potential to accelerate its growth in the future. On the flip side, over the last three-year time frame, Riverstone has faced many challenges, including pricing pressures, which has limited its growth in recent times.

In the next article, I will compare three valuation metrics between the pair and conclude which company at current prices holds better value for investors.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Riverstone Holdings Limited and Top Glove Corporation Berhad. Motley Fool Singapore contributor, Jeremy Chia, owns shares in Riverstone Holdings Limited.