Sunday, 18 August 2013

Riverstone Holdings FY13 H1 - Forging Ahead

Riverstone Holdings had released its H1 FY13 financial results which shows a very encouraging trend.

*All amount stated in Malaysia Ringgit

Q2 FY13 revenue increased to 90.4m, an 15% increase from H1 FY12. It is also a record quarterly profit.

Gross profit margin for H1 FY stood at 26.2%, a stark improvement from 21.7% in H1 FY12 due to 'improvement in production productivity and favourable raw material price'. Net profit margin improved from 13.6% to 15.3%.

Moving on to its balance sheet. It is in a net cash position, with 91m of cash and 57m of liabilities. This means that Riverstone is able to completely pay off all the money it owes using just the cash, and still have 34m cash remaining. A rock solid balance sheet indeed.

The company continues to generate healthy cash flow. With a net operating cash flow of 11.8m, and capex of 7.14m, it enjoys free cash flow of 4.66m.

To view the results from a broader perspective, it is worth comparing the results with past years'. A picture paints a thousand words so let's look at some of the charts etc.

Increasing revenue over years.
Source: Riverstone H1 FY13 results presentation
Steady net profit. Source:
Riverstone H1 FY13 results presentation.

Improved gross profit and net profit margin.
Source: Riverstone H1 FY13 results presentation.
Increasing dividends.
Source: Riverstone H1 FY13 results presentation                               

Qualitatively, Riverstone management has demonstrated commitment and ability in creating a niche market for the company and expand production line opportunistically.

  • It commissioned 6 new production lines and increased production capacity from 2.5 billion to 3.1 billion gloves annually. This had borne fruits as shown from the increasing revenue.
  • Prudently expanding the dipping lines, existing factory building and land acquisition by utilising the proceeds from warrant conversion. 
  • Expansion without taking on more debts, but instead relying on proceeds from warrants conversion. Although it results in an increase of outstanding shares, EPS has not been compromised as it grew from 3.28 cents in Q2 FY12 to 3.99 cents in Q2 FY13.
  • Management has been re-iterating its efforts to develop the cleanroom gloves market that enjoys higher margin and carve out a strong niche market for the company. 

Lastly, the management prioritise shareholders' interest, as shown from its track record of increasing dividends payment and a 50% payout ratio on average.

Taken together, it is a well-run company with efficient operations, competent management with clear expansion strategy and vision, with interest aligned to the shareholders.

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