Tuesday, 3 March 2015

Riverstone Holdings FY14


Riverstone Holdings is positioned as a growth stock in my portfolio. Being a growth counter, its earnings had not disappointed in the past few quarters. Similarly, its share price has seen a nice increase to the current $1.18. At this price, it is valued at PE 19.52 based on 2013 earnings.

(I previously blogged about Riverstone here)

For my dividend and assets holdings, I usually just glance through the top line results and focus on the balance sheets strength, amount of ops cashflow statements and ability to continue paying dividends. However, for my growth shares, it is important to delve into its earnings to ascertain if it is still having the same growth story. After all, sustained growth in topline and bottomline is what keeps a growth share price rising. And any signs of hiccups may cause investors to run and share price to tumble due to fear that the company is not able to grow at a rate in future that justifies the current high PE. The higher the PE, the smaller the bad news that’s required to send price tumbling. 

For Riverstone, based on 2014 EPS of RM 0.1911, it is valued at PE 16.36 now (using exchange rate of 1SGD = RM 2.65). Not exactly cheap, but not too richly valued either.
Here are the key FY figures (calculation based on RM):


         
Besides, it has 35 m in cash with no debts; produced 62.8m net cashflow from ops (decrease from 80m from FY13); dividend of 6.9 cents (increase from 6.8c)  , a 36.1% payout ratio (FY 13 dividend is 6.8 cents, 43.5% payout ratio); ROE of 19.1% vs 18% in FY13; and ROA of 16.2% vs 15.2%.

It seems that the company has done pretty well for the past year and managed to maintain its growth story. It was able to control its cost well looking at the consistent margin, and churned out positive ops cashflow.  If we look at its past few years’ record, it is all the more impressive with nicely rising figures:




However, there are things to be wary about:
                                          
-Trade receivables increased from 62m to 86m, a 38.7% increase, while the revenue increased by 11%. Could there be problems recovering the credit sales due to a capacity expansion and aggressive sales promotion? Rising receivables is always something to keep a close eye on for manufacturing company.

-If we zoom in to quarterly cashflow statement, there is an increase in receivables and prepayments of 9.13m, compared to a decrease of 630k in Q4 FY13. Full year trade receivables written off also increased from 13k to 321k.

These are something to take note of and will need constant monitoring in the coming quarters, especially when the company is undergoing capacity expansion with forecasted increase sales. So long as receivables and write-off are kept in check, I would not be unduly worried.

Also, at a longer time frame, the following are headwinds that could pose some challenges to the company’s growth:

-USD and RM currency fluctuations arising from rise in interest rates and Malaysia’s weak fiscal strength due to falling oil price. Is the natural contract and forward hedge/instruments sufficient and safe?

-fluctuations in raw material costs. Although Riverstone has shown commendable consistent GP margin thus far, is it sufficient in future?

-capacity expansions by other glove manufacturers in Malaysia. Could this lead to price war and reduced profitability? Although the just-completed expansion had secured forward contracts, would the additional 1b more be similarly successful? Would competitors embark on product innovation and muscle their way into RV’s niche market of cleanroom gloves?

-GST charges in Malaysia

-A sudden slowdown in world economy that results in reduced discretionary consumption such as electronic product or smart phones thus dragging down demand for clean room gloves.

These are factors to be mindful of in future. For now, based on the management’s success thus far, I would remain vested and continue to pay attention to the execution of strategies articulated by the management. I look forward to future quarterly reports which will tell me if the company continues to be a worthy share to hold on. 

2 comments:

  1. Nice write up about the company there. I'm sure you've made hefty gains from your holdings in Riverstone. Good work!

    ReplyDelete
  2. Ass...saya tidak menyanka kalau saya sudah bisa sesukses ini dan ini semua berkat bantuan MBAH RAWA GUMPALA,saya yang dulunya bukan siapa-siapa bahkan saya juga selalu dihina orang dan alhamdulillah kini sekaran saya sudah punya segalanya,itu semua atas bantuan beliau.Saya sangat berterimakasih banyak kepada MBAH RAWA GUMPALA atas bantuan nomor dan dana ghaibnya,alhamdulillah kini saya sudah bisa membuka usaha kembali yang dulunya pakum karna masalah faktor ekonomi dan kini kami sekeluarga sudah sangat serba berkecukupan dan tidak pernah lagi hutang sana sini,,bagi anda yang punya masalah keuangan jangan sungkan-sungkan untuk menhubungi MBAH RAWA GUMPALA karna insya allah beliau akan membantu semua masalah anda dan baru kali ini juga saya mendaptkan para normal yang sangat hebat dan benar-benar terbukti nyata,ini bukan hanya sekedar cerita tapi inilah kisah nyata yang benar-benar nyata dari saya dan bagi anda yg ingin seperti saya silahkan hubungi saja MBAH RAWA GUMPALA di 085==316==106==111




    (((( BUKA BLO DANA GHAIB DAN NOMOR GHAIB MBAH RAWA GUMPALA ))))







    Ass...saya tidak menyanka kalau saya sudah bisa sesukses ini dan ini semua berkat bantuan MBAH RAWA GUMPALA,saya yang dulunya bukan siapa-siapa bahkan saya juga selalu dihina orang dan alhamdulillah kini sekaran saya sudah punya segalanya,itu semua atas bantuan beliau.Saya sangat berterimakasih banyak kepada MBAH RAWA GUMPALA atas bantuan nomor dan dana ghaibnya,alhamdulillah kini saya sudah bisa membuka usaha kembali yang dulunya pakum karna masalah faktor ekonomi dan kini kami sekeluarga sudah sangat serba berkecukupan dan tidak pernah lagi hutang sana sini,,bagi anda yang punya masalah keuangan jangan sungkan-sungkan untuk menhubungi MBAH RAWA GUMPALA karna insya allah beliau akan membantu semua masalah anda dan baru kali ini juga saya mendaptkan para normal yang sangat hebat dan benar-benar terbukti nyata,ini bukan hanya sekedar cerita tapi inilah kisah nyata yang benar-benar nyata dari saya dan bagi anda yg ingin seperti saya silahkan hubungi saja MBAH RAWA GUMPALA di 085==316==106==111

    ReplyDelete

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