Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based company operating in two key areas of the rubber gloves industry: cleanroom gloves and medical gloves.
In this article, I will share with readers three reasons the company remains on my watch list in 2020 — and beyond.
Excellent track record
The first thing to like about Riverstone is its stable and sustainable growth over a long period — one decade.
From 2008 to 2018, Riverstone’s revenue increased from RM 141.4 million to RM 921.0 million, up by 551% during the period. This translates to a compound average growth rate (CAGR) of 20.6%. Also, net profit has grown from RM 24.4 million in 2014 to RM 129.7 million in 2018, up by a CAGR of 18.2% during the period.
Though past record is no guarantee of future performance, we prefer to invest in companies that have solid track records. Personally, I think Riverstone’s track record is exactly that, which should give us some assurance that the company has been executing well historically.
As a glove manufacturer, Riverstone is considered a defensive company since its products are needed in both good and bad times. In other words, its products will grow with the global economy.
Moreover, it operates in an industry with favorable tailwinds. Increasing hygiene standards/regulations, an increase in demand from emerging markets, and new health threats are a few of the key drivers for future growth.
In order to ride the growth tailwind, the glove maker has been investing in new capacity over the last few years, with additional capacity to come on board in the next few years. Thus, we think Riverstone is well positioned to grow for many years ahead.
Pristine balance sheet
Another thing to like about Riverstone is its strong balance sheet.
Here, the idea is simple. Riverstone will need to have enough cash, or the ability to borrow money to satisfy its existing obligations, as well as to invest for the future. The good news is that Riverstone has a solid balance sheet. As of 30 June 2019, it has RM 92.4 million in cash and cash equivalent and RM 16 million in debt.
Thus, we can see that Rivestone is well positioned to sustain its financial obligations (such as paying dividends) while maintaining its growth trajectory.
The Foolish bottom line
Given all of this, I think Riverstone is a good company to keep on my watch list for the foreseeable future.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended Riverstone Holdings Limited.