Riverstone

$SGX-AP4 RIVERSTONE

As we close in to the 5 years of Covid boom and bust of the glove sector, this is still the only rubber glove company I know in the world, that came out of it without recording a single financial loss in a quarter.

And listening into their latest QR briefing, they're not stopping on YoY earnings growth.

I believe besides $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD), RIVERSTONE will be exposed more than other glovemakers to US client demands. $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD)

In the briefing, management mentioned that healthcare glove volume had increased 30% QoQ, with the driver being the tariff in US made some clients moved back and gave order. And the best thing is that ASP for US clients can and had been increased.

Management believe that US market will contribute 70% to overall business next year, up from 40% contribution this year.

Looking forward to more yummy dividends and earnings growth in 2025!

@zhexiangxd @CalmSage @terence775

@LittleShare Because of their different divisions, TRP divisions margin have increased while the glove still decreasing and for $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) focus on glove division, that’s why Kossan’s performance better than Harta. Btw $SGX-AP4 performance also seem not bad

$SGX-AP4 RIVERSTONE - Takeaway from Q3 2023 Briefing

Before $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) posted a result that was back in black yesterday, RIVERSTONE posted a strong number as well last Friday. This means that 2 of the historically strongest and well run glove manufacturers posted a QoQ improvement. So is the worst over for the industry? Or strong result was mainly driven by USDMYR?

Here's my takeaway for Riverstone, as well as sharing CIMB's takeaway.

- Volume / Revenue / GP contribution for the company for the quarter between cleanroom v medical:
Volume: 20/80, Revenue: 45/55, Gross Profit: 75/25
- For Riverstone, margin is better mainly due to favourable raw material cost, favourable FX and favorable mix of healthcare / medical glove... For context, Riverstone sells more customised / thicker medical glove than the generic medical glove (3.2-3.4g thickness) over the quarter
- Margin improvement also come from the company ability to secure new customers
- Blended ASP for the company during the quarter was USD26-27 for medical glove, compared to USD25 last quarter. However it's to be noted that generic medical glove price sold by most Malaysian players are still hovering at USD19, while competitors from China are still selling at USD16.
- For cleanroom glove, ASP remains the same but looking at a slight reduction in ASP for class 1000 and below in the next revision. The future trend for cleanroom glove is positive for next year, coming from pharmaceutical client. For semicon clients, seeing improvement but whether it translates to real order remains to be seen.
- Currently Riverstone is at 55% utilisation
- Average FX during quarter was RM4.61
- Management reckons the worst is over, which was in 1H of 2023, but they're not sure how fast the pick up will be. Some factors that contribute to this is the fact that much smaller glove players have stopped operations.
- Going forward, performance will be dependant on once again volume pick up for both medical and cleanroom, FX (above or below 4.60), raw mat price (above USD700-800?), man power.
- Riverstone also plans to payout all earnings this year. They still have cash in the bank. Thus far they had paid 23c ringgit or 6.7c sgd or above 10% dividend yield for 2023. Remarkable.

All in all, we are closing in the 4th year of boom and bust cycle of the industry, and to me, Riverstone comes out of it as the only glove manufacturer globally that remains profitable the entire duration, and of whom had showcased time and again, it's the best run company in the industry.

@leonjakelim @Jay888 @maxtan @Jasonsum @FIRLGuys @zhexiangxd @andyc272 @CalmSage @hokuan @terence775

$SGX-AP4 Revenue flat, Profit increase QoQ, gross margin 35%! 5 sens dividend again ...syukurr

In this week's podcast, we have a returning guest, @Ryunanda from Stockbit on his investment performance in 2022, thoughts on recession and how to prepare for it, FED hiking rates, Ukraine Russia war, employment situations, stocks like $SGX-AWX, $MYNEWS / 5275 (MYNEWS HOLDINGS BERHAD), $TEXCHEM / 8702 (TEXCHEM RESOURCES BERHAD), Gloves ($SGX-AP4) and many more!

https://cutt.ly/6CrorgI

@Stevarac https://cutt.ly/cXxKZ5x

here ya go

I've highlighted before that the quality of gloves produced by INTCO has been unsastifactory multiple times, and that they got their approval partly because the FDA relaxed their rules simply because during the peak of covid there were not enough gloves to go around.

The FDA approval for INTCO is in a shaky situation right now, unless they improve their QC or improve their quality overall, which comes at higher cost.

I'm not saying Malaysia Gloves > China Gloves, as there are a lot of unscrupulous businesses in Malaysia too. You can see many new glove players have been flagged too, some are even already at Level 3 alert (basically banned)

I'm saying that you won't find the likes of $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) or $SGX-AP4 in the FDA alerts list anytime soon, which can't be said for the same as others who tried to rapidly ramp up their production or hastily make new lines just to make a quick buck during the pandemic.

test $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) @simpleinvesting3 $SGX-AP4

During gloves discussion, many are worried about China makers especially INTCO competition. Here's some update:

1. INTCO has announced the cancellation of their expansion plan in June, previously they've wanted to build a 40b glove factory and now it's cancelled.

2. INTCO bos has been selling his shares at higher price last year. In contrast Malaysia's bosses have been buying up their own shares.

Why it is impossible for China gloves to overtake Malaysia for now?
1. Malaysia has 60%+ of the world's market, if INTCO would want to overtake, they have to increase capacity, but now they are decreasing their production capacity just like the rest of the world.

2. Their quality is no match for Malaysia's big companies, at current low asp, customers will go for quality.

3. US tariff is still being implemented. Recent Taiwan vs China incident will not allow President Biden to be soft towards China.

These are purely just my opinions, if there's anything wrong in this post, feels free to discuss!

$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD)$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD)$SGX-AP4

@Ryunanda@terence775

Rubber Glove Industry - Snapshot of War Chest, Production Capacity, Valuations (with ex-cash) and Margin

$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) $SGX-AP4

Glove is again, the hot topic and I think Stockbit recently have got plenty of awesome and constructive glove discussions..

By now everyone knows that glove is in super bear downtrend, with financial performance dwindling quarter by quarter for... forseeable future? (haha jkn - the share price seems to think that way!) The industry is in downtrend, severely unfavorable demand / supply dynamics, last seen in 2007/8 according to managements of companies.

HARTA and RIVERSTONE held briefings last week and indicates price war is happening, especially Chinese glovemakers whom are selling below cost (below $20). No one knows how long the downturn is going to be, but some factors to take note in this fight would be - who have got the deep pockets to outrun the downcycle? who has the lowest burnrate? who proved to be good capital allocators during the recent upcycle? who managed relationship with all stakeholders the best? who managed / control cost the best? who has niche products? who's the most innovative?

On buying the dip, some considerations would be - are you liquid enough to withstand the downtrend? what's the normalised earnings in 2024/25 onwards? Will Malaysia retain market leadership as previously and if not, can you ascribe historical valuations to future normalised earnings? what's the margin of safety you are comfortable with? The tide and trend is obvious. Money is usually made by going against the tide but one needs to be smart about it.

Attached is a snapshot which I hope can be useful / helpful. Please read the **** as some companies, due to some variables may not be comparing apple to apple.

Regular readers in Stockbit would know that I believe only RIVERSTONE is the only "investable" company in the short term and always been my number 1 pick in the sector. However recent price movements in HARTA and KOSSAN is making them... interesting. SRITRANG also not bad. :)

Lastly, do read some other threads from @terence775 @wsk20 @hokuan, videos from @FIRLGuys abt the industry - many great discussions in this platform!

Sharing my 2cents as usual.

@hokuan @terence775 @boncos @legoen @FIRLGuys @Sweech @wsk20 @zhexiangxd @jiaming8yap @victoryong @weiboy90 @Jay888 @chukang @mahcheecherng

$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) $SGX-AP4

In this video, we discuss the glove industry's current situation, Malaysian glove makers' earnings result versus Singapore glove maker, will there be more pain going forward, what should you expect and many more!

https://cutt.ly/8Xhs5NB

$SGX-AP4 RIVERSTONE Q2 2022 Briefing Takeaways

RIVERSTONE had become the most profitable glovemaker in Q2, beating HARTA KOSSAN TOPGLOVE etc... Their result highlights the resiliency of the business and how well run the company is. Their top management had steered the company smoothly despite the extremely bumpy roads. Here are some highlights of recent briefings.

1) Q2 Business Breakdowns...
- Revenue: cleanroom vs medical / healthcare: 43/57
- Quantity: cleanroom vs medical / healthcare: 20/80 (total 1.8b gloves)
- GP: cleanroom vs medical / healthcare: 64/36
- GP margin: 60% for cleanroom, 20% for medical / healthcare. Blended 37.7%

2) Price trend & demand / supply dynamics...
- Cleanroom maintained above usd100 per carton in Q2. Healthcare 10% reduction in q2 with ASP at 29$
- Cleanroom can maintain price in Q3 but Q3 demand slowdown abit by about 10% driven by slowdown in China, Riverstone, just like others have problem delivering their products there. Q4 should be better for Q3 as seasonality kicks in.
- Healthcare q3 asp drop to $25. Not seeing improvement demand... Demand had reduced significantly.. in short oversupply in healthcare glove remains. Predicting 2H healthcare business to be much lower.
- Management unsure how long the oversupply will be... Currently distributors are still in overstock situation. Situation could be another 6m to 1Y. Management is seeing China slowing down expansion and new players getting out.

3) Competitive Advantage in Cleanroom Glove
- Any new entrant to cleanroom glove? Not at their grade. For cleanroom glove, there are low to high grade.. class 10, 100, 1000 and beyond.

Riverstone is confident of their competitive advantage in class 10 and 100 due to experience n technology (they can deliver electrostatic clean room gloves).. Low end cleanroom will compete in pricing not quality. In short, they're still comfortable wf the cleanroom business.

- Slowdown in semicon will impact cleanroom glove? Cleanroom glove have got many different customer verticals. Slowdown in semicon will not have so significant impact. Currently they're seeing customers in Pharmaceuticals doing quite well.

4) Plant utilisation and capacity
- In Q2, utilisation is about 74%. This will shrink to 65% in Q3.
- On expansion plan. Management highlights they had always been conservative. Currently they're at 10.5b and looking to add 1-1.5b pieces capacity to be 12b. The plant is ready but they will delay commissioning the additional 1.5b piece
- Beyond 2022, there are also more phases of expansion (land is available) but there're No urgency to increase capacity.

5) Labour issue
Labour issue is no longer acute now that plant utilisation had dropped

6) Cash and dividend
Riverstone has 1.2b cash, after pay 10c dividend upcoming still have 1b cash.. They plan to reserve some for future expense, and to pay the rest as dividend.

7) Industry historical trend
There had been many downcycles in glove sector, 2013/14, 2008 was the last severe ones where hundreds of glove factories being built. Many newcomers exited as soon as they entered.

8) Others
- Raw mat price is reducing trend.. stable or reduce.
- Selling below cost? Malaysian players are quite disciplined to NOT do that but the Chinese players ARE selling below cost / at cost.
- How come their ASP for healthcare is higher than peers? Riverstone mentioned that for healthcare, they have lower volume (capacity), and that a portion is customised products..

All in all, came out from the briefing feeling satisfied and proud to be a shareholder of the company as they're navigating rough waters pretty well. I expect Q3 earnings to sequentially be lower, but it will still be better than the industry.

In the first post of this thread, I mentioned that Riverstone could challenge getting RM300-400m of profit, and they're still on track, that's not an easy feat in this market. The company is currently trading around 9-12x forward PE and have got 35% of their market cap in cash.

@zhexiangxd @maxtan @Maxtan727 @terence775 @Jay888 @victoryong @THL02 @FIRLGuys @leonjakelim @Jasonsum @Jinnsern @hokuan @jiaming8yap

$SGX-AP4 RIVERSTONE - the most profitable glove company in Q2 2022

(arguably the most profitable glove company in CY2022 thus far [depends on how much HARTA was taxed in Q1 2022]

Riverstone released their result yesterday and it was remarkable (in the context of the current market).

***
Breakdown:
Q1 2022 PAT RM109m
Q2 2022 PAT RM100m

1H 2022 PAT RM209m
***

The company made around RM100m profit for the quarter - that's higher than any Malaysian glove company! HARTA (just released) recorded RM88m, KOSSAN recorded RM46m; TOPGLOV (Feb-May) recorded RM15m and the others are probably struggle to keep themselves profitable.

Bear in mind that vs the top 4 glovemakers, in terms of capacity of glove produced per annum:

TOPGLOVE capacity is 100b
HARTA capacity is 44b
KOSSAN capacity is 34b
SUPERMAX capacity is 26b

whilst RIVERSTONE capacity is at 12b!!

Also included is dividend announcement of 10c or around 4% yield. They're giving back their excess cash to the shareholders.

Will share more updates post briefing.

@zhexiangxd @maxtan @Maxtan727 @terence775 @Jay888 @victoryong @THL02 @FIRLGuys @leonjakelim

@Ryunanda Might be best to update in the main thread, but just wanted to post this here too...

$SGX-AP4 RIVERSTONE's results summary fresh from the oven. Just WOW. Truly remarkable!!
There's even 10 cents (MYR) dividend, equivalent to 0.032SGD or 4% yield based on latest closing.

On hindsight, I should've just trust my instinct when doing my research previously and allocate more here instead of 50/50 between here and HARTA haha....small boys are beating big boys now

Top 4 Glove Stocks Being Hammered: Are They Bargains Now?

Sharing from the web
Source: smallcapasia

Beyond your regular healthcare stocks, glove stocks are actually an essential part to the healthcare industry too.

However, although the pandemic is still on-going, glove stocks are taking a beating like no other.

Look at that 1,250% gains from pandemic evaporate in 1-2 years’ time!

While the “glove super-cycle has ended”, gloves are still part of a daily routine in many corporations – semiconductor environments, hospitals and more. This will result in a sustained growth in the glove industry in the future even with the tapering off of the COVID-19 pandemic.

With that, we decided to delve into the ‘Heavenly 4 Glove Stocks’ below:

#1 $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) Corp Bhd (SGX: BVA)

Top Glove Corp Bhd, the #1 gloves maker in terms of sales volume, manufactures and sells gloves through several product lines to a diverse group of global customers.

Some of the different glove options include latex, nitrile, vinyl, and surgical.

Top Glove’s products are utilized in an array of end markets such as aerospace, food, beauty, medical, and home care.

Traditionally, the company has derived over half of its sales from its nitrile and powdered latex product lines, with customers in North America and Europe generating the most demand.

What started as only a local business enterprise has captured 26% of the world market share for rubber gloves today – an impressive feat by any measures!

In financial performance, the company registered a 124% spike in FY21 (ending in August 2021) due to the pandemic led demand.

However, for the first half ended Feb 28, 2022, the group’s revenue slumped 70.04% to RM3.03 billion from RM10.12 billion.

Meanwhile, net profits plunged 94.77% to RM273.27 million from RM5.23 billion in the year-ago period due to the high costs and oversupply situation.

At the time of writing, its share price is around S$0.325 and it translates to a trailing P/E ratio of 9.7x. Based on its FY2017 dividends per share of 0.046 Singapore cents, the dividend yield comes up to 14%.

#2 $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) Corp Bhd (MYX: 7106)

Another famous yet smaller glove company in Malaysia is Supermax Corp Bhd – an international manufacturer, distributor, and marketer of high-quality medical gloves and contact lenses.

It offers various types of latex gloves, which are exported to over 155 countries around the world.

It has operational footprints across America and Canada, Europe and Asia with largest end market by revenue in America.

With 2.3x revenue jump and 6.3x PAT jump in FY21 (ended June 2021), Supermax was one of the biggest winner of the glove super cycle.

Similar to Top Glove, Supermax reported a 78.95% YoY decline in its 3Q 2022 revenue to RM407.80 million and its net profit plunged 99% as gloves ASP and demand subside.

The group also replied, “Many of the large buyers seen at the height of the pandemic, such as the governments and large hospital chains are full or near full in terms of their PPE stocks after a period of aggressive sourcing and buying. Buying activities have moderated in tandem with reduced consumption levels”.

On the other hand, Supermax is not resting on its laurels as it officially started the ground-breaking of the US plant in May 2022.

This is part of its expansion plans to address concerns on the potential disruption of PPE supply chains in the US. Production is expected to start circa 2Q2023.

Supermax’s share price last traded at RM$0.83 5 and sports an incredibly low 1.3x trailing P$SGX-AP4

#3 Riverstone Holdings Limited (SGX: $SGX-AP4 )

Riverstone Holdings Ltd is engaged in the manufacture and sale of gloves and non-glove consumables such as finger cots, static shielding bags, face masks, wipers, and packaging materials.

The group’s products are widely qualified and used in sensitive industries like the Hard Disk Drive, semiconductor, and healthcare industries.

Riverstone stands out from the other glove makers with its niche focus on clean room gloves.

But it was not spared from the ASP declines too. For 1Q22, Riverstone reported revenue and net profit decline of 61.0% yoy and 79.2% yoy respectively as a result of the normalization of healthcare gloves ASPs (Average Selling Prices) from pandemic highs.

In contrast, Riverstone says its cleanroom gloves continue to remain in demand as the forecasted 13.6% growth of the worldwide semiconductor revenue could increase demand from its customers.

As Healthcare glove demand plateaus, cleanroom gloves are a key driver for future earnings growth. 1Q22 ASPs for Cleanroom gloves and its sales volumes were steady from strong secular demand.

Looking ahead, the group says it will be entering into its next phase of expansion plans for its production lines on existing lane with Phase 7 ending in 2022.

The next phase will increase the group’s capacity by 1.5 billion pieces to 12.0 billion pieces of gloves annually.
Riverstone’s shares last closed at S$0.775 and gave a 2.5x trailing P/E ratio. Based on the pre-pandemic FY2019’s divdends’ per share, it offers around 3% dividend yield.

#4 Sri Trang-Agro Industry (SGX: NC2)

One of the most unique thing that stand out is that Sri Trang Agro-Industry PLC generates the vast majority of its revenue through the production and distribution of rubber and latex products.

These products are used in the tire, automotive, and adhesive industries.

It also produces rubber gloves that are used for medical and industrial purposes, while also specializing in high-pressure hydraulic hoses used for industrial and mining operations.

Sri Trang Agro-Industry’s primary processing facilities operate in Thailand, Indonesia, and Myanmar.

It’s products are distributed in several countries while it is the largest manufacturer of medical rubber gloves in Thailand.

It reported a net profit of S$952.4 million in 2021. This was a 64.4% increase yoy, on the back of a 55.6 per cent yoy surge in revenue.

However, it suffered the same fate as other glove makers with the sharp dip of gloves Avg. selling price (US$76 to US$27) outweighed the modest 17.3% increase in sales volume.

Based on Sri Trang Agro’s share price of S$0.785, it is trading at a trailing P/E of 2.7x and 1.9% indicative dividend yield if we take the FY2019’s dividends per share as a mark.

Conclusion

By observing the charts of the glove stocks, we can see that they have given up a large part of their share price gains in the past year or so.

The 4 glove stocks mentioned above are all trading below 10x trailing P/E ratios too – Supermax at only 1.3x!

However, it probably makes no sense because even as the ASPs of gloves continue to normalize (drop), the huge cash influx for the companies are already in their coffers.

The next step is to zoom in to glove companies with high re-investment rates or probably a competitive edge in order to rise above the dull glove industry in future.

@terence775 @jiaming8yap @hokuan @pineforestof89 the sale of extra capacity had started. Good news that the industry is moving towards demand / supply equilibrium.

Until the oversupply situation improves, the short term business and industry fundamentals will still be challenging but if history were to repeat itself, the big glovemakers should strive.

The 1 million question if you're to invest in glove companies for the long term now is: How much market share will the Malaysian glovemakers lose out say... 5 - 10 years post covid vs its oligopoly situation pre-covid?

Like it or not, nitrile medical glove of a certain quality / standard - had become a commodity.

$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) $SGX-AP4

$GLOVES - Divergences Between Producers from different countries

I attach herewith a chart comparing the price movements of a number of famous glove producers over the past 1 month;
China glove producers, the likes of INTCO and Blue Sail are up about 5-10% this month.

Producers listed in other Stock Exchanges like $SGX-AP4 and Sri Trang are down around 8-10%.

Our local glove players like $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) are down 20-35%.

Some major divergences are happening here.

@DavidSee @terence775 @victoryong @hokuan @zhexiangxd in my opinion, $SGX-AP4 RIVERSTONE is the only "investable" glovemaker in the long AND short term.

They're probably going to be one of the only few glovemakers making profit in the next few quarters.

As mentioned many times before, this is due to:

1) their exposure to a niche segment - the cleanroom glove which is still a steady rock. To recap, in the Q1 result which was a FLAT QoQ result, 42% of revenue and 60% of GP was contributed from the cleanroom glove segment. ASP for this segment is steady.

2) how well run the company is by the founder and management team.

On the second point, I'd like to highlight that unlike alot of other glovemakers in the country, during the peak of glove bullishness, they were NOT SCREAMING on 'gungho' capacity expansion like some of the local and China counterparts, which in hindsight - an event that probably spooked the market and industry and tilt the demand and supply paradigm / perception negatively in the medium term. The management simply understood the game and the business cycle and thus their conservative expansion plan n target had led them to only expand in a manner which should keep their overall utilisation at a good healthy level. (75% and higher)

I would also like to highlight that unlike some glovemakers, they did not "kill" their clients during their desperate times but increased medical glove ASP steadily moderately for longevity of business relationship, something which is being returned at the moment when situation flipped. They also took advantage of other cleanroom glovemakers who decided to chase the money and abandoned the segment when times were good in the medical glove segment. They also had always treated the workers well, even before the entire CBP / ESG issue came into play. Lastly they also did not recklessly spent their windfall cashflow nor do they keep it all to themselves.

In Q2, it seems that for medical glove segment, costs pressure supercede ASP hence it's another round of heavy margin compression. RIVERSTONE's Eco Medi will not be different, but at least their utilisation rate & business relationships should keep it afloat. This is whilst their cleanroom segment continue to strive in profitability.

Chinese Glove Maker Calls off Expansions (credit @terence775)

$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) $SGX-AP4

INTCO is a high-tech manufac company that produces medical consumables and equipment. During 2017-2019, the net profit of INTCO was around 145-180 million yuan annually. In 2020 and 2021 however, their net profit went up to 7-7.5 billion yuan annually. Their share price has fallen considerably since 2021 and now has a market cap of roughly 16B yuan.

According to the latest board meeting, $INTCO is stopping their capacity expansion project for high grade medical gloves which would have added another 40 billion gloves to global supply; the investment for this project would have been 40 billion yuan.

This is their response to shifts in market demand for gloves. Besides curbing investment risks, they mention that they did not satisfy their coal consumption indicators as required by the government which makes the project even more unfeasible.

But this is only news for one project, INTCO still has many plans to expand capacity in other provinces and Vietnam, though its less certain that they will follow through.

At present, they are already producing 75 billion gloves from 4 production bases, which means if the project were to proceed, it would have added 53% to INTCO's production capacity.

Compared to 1Q2021, where demand for gloves has peaked, 1Q2022 is seeing a drop in net profit by 97.8% yoy.

From this shocking drop in profits, it's not far-fetched at all to think that many more glove-producing giants will start scaling back on their production and shift their focus elsewhere. With the big fish cutting down supply for gloves, does that mean local producers like $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) get a bigger slice of the pie for global glove supply?

Currently, Harta is nearing RM3.00.

@terence775 @hokuan @wsk20 Personally think that the only glove counter which is "investable" for the short term is RIVERSTONE $SGX-AP4 as they have an inelastic product. They also do not house HUGE capacity for medical glove.

For $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) and other "big" manufacturers.. healthcare / medical glove situation (sales volume & ASP vs Production cost & utilisation) has not yet improved to a level where it's with strong confidence that they can be profitable in the next quarter.

Additionally, TOPGLOV cash reserve and market perception (on the previous buybacks, foreign worker treatment amongst other things) is extermely poor vs their peers.

However, they will survive this downturn as they had done in the past.

* Important part of the QR note *

- production costs moving upward due to global inflation and as the Russia Ukraine conflict drove up crude oil prices.

- additionally, the Group contended with increases in natural gas and electricity tariffs,

- as well as minimum wage implementation which came into effect 1 May 2022.

- the Group was unable to fully pass cost through amidst the ongoing oversupply situation.

- However, average selling prices (ASPs) are declining at a far slower pace which will help cushion the cost impact going forward.

YEWLEE（0248）IPO 新股分享 – 04.06.2022

下周就上市的 YEWLEE，不知道大家怎么看呢...？

🔵 从 2000 年开始，YEWLEE 和手套生产商的 “感情“ 正式萌生而起；公司一开始主要为手套生产商所提供的液体和气体的控制和测量系统，而在 2001 年内，公司也开始了工业机械和零部件的贸易业务，而其中所包括的产品就有工业刷（“Industrial Brushes”）在内；那伴随着公司发现手套生产商对于工业刷的需求持续上升之下，他们也在 2004 年正式在怡宝设立自己的工业刷生产线，至今为止也已经和客户打下了非常好的关系，一些我们熟悉的公司如 TOPGLOV、SUPERMX、HARTA、RIVERSTONE（SGX:AP4）等，都是 YEWLEE 的客户...

阅读全文：https://cutt.ly/qJWYOlS

$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD)
$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD)
$SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD)
$SGX-AP4

$SGX-AP4 RIVERSTONE - The BEST Performing Glove Counter in 2022

Year to date in 2022, Riverstone is the best performing glove counter in the world in terms of absolute return (share price + dividend [13c sgd]).

On Tuesday, Riverstone reported their Q1 2022 result (on the same day as $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD)), and they also reported the strongest quarterly financial performance in the glove industry with a flat QoQ earnings. Probably the only glove counter who achieved that thus far.

Here's some briefing takeaways.

1) Financials QoQ
- Revenue -2% QoQ, Net Profit -2% QoQ.
- In Q1 2022, Volume sold increase 21%, ASP came down together with cost per unit, but overall margin down hence qoq not much change..

2) Q1 2022 breakdown...
Total volume sold: 2.14b gloves (21% increase QoQ)
Volume: 20% cleanroom 80% healthcare
Revenue: 42% cleanroom 58% healtcare
GP: 60% cleanroom 40% healthcare
GP margin: 55% cleanroom 24% healthcare

- Cleanroom ASP same as q4 whilst healthcare ASP around USD30-32
- Utilisation in Q1 arond 80%

3) Current Q2 situation and beyond
- Cost of production per glove going up in Q2, gas prices gone up from RM32 to RM40, raw mat BD increase due to oil price, min wage on labour - management think there could be overall 5% increase in cost.
- Medical glove ASP hit lowest point in April but May and June increased slightly. Volume sold and utilisation should be able to sustain
- For cleanroom glove, ASP had been very stable. Volume will see increment as Q1 is seasonally the weakest for cleanroom glove. On target to produce 2-2.5b cleanroom glove for the year. There's a labour constraint on cleanroom upon the labour intensive sterilisation process. So once they get additional 15% of total labour, they can optimise their cleanroom production.
- Riverstone on target to deliver 10b gloves in volume for FY22
- Overall, margin going forward should be quite comparable to q1 2022.

4) Industry analysis
- On Chinese competition, it's being monopolised by a few big players. They wanna get market share by selling lower price hence their result shows losses or single digit margin for Intco. Management believe they can't sustain the ASP going forward. Management believes their distributors still prefer Malaysian glovemakers for the consistency of quality and reliability.
- Whilst hitting volume gain this quarter, management highlights it is because of low order in q4. It’s not because of strong demand just yet. Distributors, especially from Europe are starting to replenish stock.
- Management mentions that the current industry situation is not different than decades ago. They're also starting to see some smaller manufacturers whom had made alot of money during Covid and discouraged by what's happening in the past few quarters are considering to take profit / close their business.

5) Other quick points
- Blended tax rate assume at 24.4%. Unlike Harta, Riverstone FY ends in December. There're also some reinvestment allowance.
- Current capacity 10.5-11b. 2022 end will be 12b.
- Not looking to acquire / buy out glove companies because they believe their own built new lines has better technology and automation.
- Riverstone been getting new clients from cleanroom industry.
- Long term driver for cleanroom glove is the increase capex spending by the electronics / semiconductor sector globally as well as pharmaceutical industry.


Summary:

Riverstone's earnings driver going forward would be: a) increasing sales volume and capacity utilisation b) getting foreign labour in, train them quickly so they can plug the labour shortage in the cleanroom segment to maximise its potential. Management mentions that this can be "significant". c) FX rate.

Risk to the investment would be slower demand / volume sold, margin for both glove segment keep shrinking.

In the first post of this thread, I mentioned that Riverstone could challenge getting RM300-400m of profit, and they're on track. No one expected a glove company that's able to maintain profit QoQ, but Riverstone did it!

Current market cap of SGD1.12b (MYR3.5b), of which cash position in balance sheet is MYR1.7b (50%). The stock is trading at merely 10x FY2022 expected earnings or 5x FY2022 ex cash earnings.

Despite weak market sentiment, this is still a blardy strong solid counter to stay invested in.

@THL02 @zhexiangxd @wongweitung @khaijiunnlim @maxtan @Jasonsum @Jinnsern @andy721 @FIRLGuys @terence775 @asheryap @larrycfh @danielyeo @farhanmi

$SGX-AP4 RIVERSTONE - Among glove makers, Riverstone has most attractive margins.

$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) despite being the world's largest glove manufacturer, had the lowest profit margin and returns within peer group.

BT had a coverage on glove this morning which highlights some financial ratios across the 4 big players listed in KLSE, 2 malaysian players listed in SGX and Sri Trang listed in TH.

Whilst the ratio makes for a good reading, it's still somewhat backward looking, as the data covers past 12 months figures. As we all know, ASP for nitrile medical glove is now back to pre-Covid or for some, is even lower than pre-Covid prices. Perhaps, it's more accurate to look at pre-Covid data then?

Here's a link to my post in May 2020, a time still early within the crazy bull glove run. https://stockbit.com/post/3846509

In the post I highlighted the superior margin Riverstone had PRECOVID period. I mentioned:

"RIVERSTONE is actually the fifth largest listed Malaysian glove maker after the Malaysian top 4 manufacturers. Its bigger than $COMFORT and $RUBEREX. It also have ROE and profit margin comparative to only $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD)..

Comparison.. valuation & profitability (TTM)
PE / ROE% / Profit Margin%:

Harta: 59.8x / 16.6% / 16.1%
Top Glove: 47.5x / 9.6% / 7.7%
Ruberex: 37.8x / 5.5% / 5.1%
Supermax: 37.2x / 8.9% / 8.3%
Kossan: 32x / 15.8% / 10.1%
Comfort: 28.7x / 10.7% / 6.5%
UG Healthcare: 23.5x / 3.9% / 2.4%
Riverstone: 20.9x / 16.5% / 13.2%..."

RIVERSTONE and HARTA has the best net margin as of 30th March 2022, during normalisation of ASP, as per the article. More importantly, they actually also had the top 2 best margin PRE COVID.

Tagging: @Jasonsum @FIRLGuys @leonjakelim @maxtan @Jinnsern @mengteck @wsk20 @zhexiangxd @mikeleong @andy721

A throwback on our study on $SGX-AP4 , for Chinese readers:

RIVERSTONE（SGX:AP4）厂房参观 – 10.03.2022

当提到手套股时，相信大家首先会想到的公司就是本土的四天王；而业绩在昨天午盘出炉的 TOPGLOV 直接以下跌 RM 0.190 或 10.16% 收盘，可见市场对于手套的盈利预期还是相当敏感。而今天分享的这家 AP4 则是有些特别，该公司的厂房虽然设立在马来西亚、泰国和中国，不过他们却是在新加坡股市中上市。

通过这次的厂房参观，我们也了解到当前手套市场的局势，对于 AP4 这家公司也有更深一层的了解，如果对手套公司感兴趣又不介意持有国外公司的话，或许可以参考这家公司的分享资讯后再做投资选择。

:o:️ 在经历了手套股的 “洗礼” 后，相信读者们对于市场最主要的两种医疗用手套 – 丁腈手套和天然橡胶手套都有了一定的认识；而 AP4 本身主要生产的都是丁腈手套，目前公司的旗下共有 70 条生产线，在 2021 年中，其年产量大约为 10.5 Billion 只（2022 年则是预计会达到 12.0 Billion 只），但有趣的是，公司的丁腈手套和市场的却有些差别。

:o:️ 在本地的多家手套公司中，绝大部分的公司都是专注在医疗用的手套上，但 AP4 却有些不同；该公司一开始的时候，其实是先以无尘室丁腈手套开始发展，而无尘室的丁腈手套则是主要用于半导体的领域中（从谈话中了解到，公司的客户都是属于 IDM 或者 HDD 行业内的公司），因此以 ASP 为参考的话，医疗用的丁腈手套价格已经下跌至 25 USD / 1,000 只，而无尘室手套则仍然维持在 100 USD / 1,000 只左右的水平。

:o:️ 在公司的 10.5 Billion 的产量中，其中就有约 20.0% 是属于无尘室丁腈手套，剩余的 80.0% 则是属于公司称为 “保险机制” 的医疗用丁腈手套；但是介于价格差别的关系，这两种手套分别占了公司约 50.0% 的营业额，而净利的占比也是如此。

:o:️ 根据对市场的观察，二三线手套股其实已经有亏损的迹象，就连 TOPGLOV 本身也跌破了 RM 100.0 Million 的净利水平；那么接下来如果中国的 Bluesail 和 Intco 继续疯狂拓展他们的产能的话，医疗用的丁腈手套价格可能会被压至 20 USD / 1,000 只的水平（疫情前的价位），在当前无论是原料、劳工和能源成本都上涨的情况之下，个人认为该领域仍然面临非常严峻的挑战，甚至一线手套公司的盈利都会被蚕食。

:o:️ 但是，先前如果没有因市场需求暴增而趁势大幅度的拉高 ASP 的话（这里指 OEM，公司 T 和公司 S 是最过分的），暂时来说这些手套公司仍能和客户洽谈以维持一定的售价，最低程度也能转嫁一定的原料上涨；而 AP4 则是属于这其中的一家，目前来说，公司的原料价格还在可控水平中。

:o:️ 至于原料的话，虽然表面上中国是丁腈手套原料最大的生产商，但实际上，该国内最大的生产企业其实是韩国在中国设立的 LG，虽然中国在原料上仍然占据优势，不过如果这两国之间出现政治不和的话，或许中国的手套生产优势会被影响。

:o:️ 提到 OEM 的课题，其实 AP4 和其他的手套公司一样，普遍都是以 OEM 为主；不过，公司旗下的医疗和无尘室手套（从 Class 10 到 Class 10k）都有自己的品牌，也就是我们所谓的 OBM 模式，不过这对于 ASP 来说，影响却不大。

:o:️ 那么无尘室的丁腈手套到底有什么用处呢？我们了解到，在半导体行业中，其实空气中的颗粒 – 俗称 “污染“ 对于半导体的生产良率将会有很大的影响，而无尘室手套在经过了特别的处理后，除了降低了污染的水平，还能防止人体产生的静电，影响半导体的生产过程，因此无尘手套的生产，确实是属于利基市场的，而 AP4 在马来西亚的市场中，至少也占据了约 50.0% 的无尘室丁腈手套的市占率。

:o:️ 当然，读者们可能也会好奇为什么其他的手套生产商为何不进军到该领域中；其实传统的医疗用丁腈手套也好，天然橡胶手套也好，最主要的还是以量取胜，通过规模经济（“Economies of Scale”）提高成本优势，以占据市场；而大部分的医疗用手套生产过程都是相同的，但对于无尘室丁腈手套而言，在生产的过程中，这些公司仍需要通过一个在产线外（“Off-line”）的清洗、氯化（“Chlorination”）的过程，而该过程就是其他手套股要进军到无尘手套的最大绊脚石。

:o:️ 据了解，该生产线外的加氯器（“Chlorinator”）主要是由 AP4 的大股东相熟的供应商提供，而我们也提到 AP4 一开始都是以无尘丁腈手套开始他们的企业之路，因此在研发上，公司肯定是占据优势的；更何况，对于本地的四天王来说，AP4 以其约 20.0% 的产能就占据了本地约 50.0% 的市占率，想要以量取胜的他们也比较无意进军到该领域中，这也为 AP4 创造了发展的良机。

:o:️ 在 2018 年的时候，AP4 也投资了不少钱到改善员工宿舍上，至今为止，公司的旗下约有 4,000 位的员工，其中约有 30.0% 到 35.0% 之间是属于外国的劳工；而在参观了公司的劳工宿舍后，可以负责任的说，这是我们见过手套厂中员工宿舍最为完善和良好的例子，至今为止公司也没有面临任何的劳工问题，个人认为在未来，公司也很少几率会被 ESG 的课题影响。

:o:️ 同时，我们也参观了公司在建设中 Plant 3 的厂房，而该厂房已经有 1 条生产线开始投产，公司也预计每个月可以增设 1 条新的生产线；而在公司的 Plant 2 的隔壁，公司也将会设立 R&D 中心，同时也会增加生产无尘室丁腈手套最后清洗、绿化制程的设备，按照公司最新的投资者分享会资讯来看，预计他们在 FYE 2022F、FYE 2023F 和 FYE 2024F 的产能会分别增加至 12.0 Billion 只、13.5 Billion 只和 15.0 Billion 只手套。

:o:️ 在 FY 2021 Q4 中，公司的净利大约为 RM 110.7 Million，对比 FY 2020 Q4 的 RM 331.1 Million 下滑了 66.6% 左右，而该数据其实也已经反映了医疗丁腈手套价格的下跌，当然在下个季度中，公司的医疗用手套业绩可能还会受到影响，不过其无尘室手套的需求量仍然很强劲，暂时没有放缓的迹象。

从 SGX 的页面来看，公司当前的 P/E 估值大约为 2.5 倍左右，股息率更是高达 15.45%，看起来非常吸引。不过，若我们以公司在 FY 2021 Q4 的业绩常态化（即以 4 个季度计算）再折扣 30.0% 的话，那么公司在 FYE 2022F 还未计算 Plant 3 的产能投产之下，其净利大约为 RM 310.0 Million 左右，以其当前市值计算的话，FPE 则大约是 11.4 倍左右，若是以 30.0% 的股息派法率计算的话，公司的前瞻股息率则大约是 2.64%，如果是 50.0% 的话，则大约是 4.41% 左右。

以价值投资的角度来看，虽然过去 HARTA 是个人的首选，不过在深入了解了手套行业，以及 HARTA 已经多次延迟了他们的 AMG 手套后，不排除 AP4 将会成为个人的手套投资选择。但以现阶段的市场而言，个人更愿意保留资金部署科技股，暂时来说会先观望 AP4 的表现，等待估值折扣更大时再部署。

#AP4
#TOPGLOV
#HARTA

$SGX-AP4 RIVERSTONE - Diversified, Niche & One of the Best Run Malaysian Glovemakers

Readers of my posts in Stockbit would know that Riverstone is a favourite stock. Whilst holding on to the company caused big losses in 2021 and returned a big chunk of the 2020 gains for my portfolios, the company remains fundamentally strong and should still be able to excel in the fast changing landscape of the glove industry.

Last week, some stockbitors and I were at their Taiping facilities, visited their plant 2 and new plant 3. This is my takeaway from the trip, combined along with the quarterly briefing takeaways post Q4 result in late Feb.


** Q4 2021 Briefing Notes **

1) Volume
- Quantity sold in Q4 2021 amounts to 1.83b pieces of glove. Down from 1.95b pieces of glove in Q3 2021. In terms of Q4 volume split, cleanroom comrprise to 19% of revenue while healthcare 81%. For the full year, total glove sold in 2021 was 8.3b pieces of glove, a 15% drop from 9.85b pieces of glove sold in 2020 (-15%). For 2022, management reckon that volume sold should be back to 2020 levels of around 10b pieces or more. Volume split for 2021 was 20% cleanroom / 80% medical. Q1 volume have seen improvement.

2) Utilisation
- Q4 and 2H 2021 sale slowed down as utilisation dropped to 70%. This was due to customer overstocking situation as well as some challenges such as labour shortage. Currently in Q1 2022, utilisation is up to 85% as demand situation is improving slowly back to normal. If this utilisation rate is maintained until end of the year, with capacity expansion, they will be able to produce 10-11b pieces of glove or more.
- Riverstone thinks they can achieve 85% to 90% utilisation in FY2022. This is due to Riverstone having relatively smaller scale if compared to its peers and having made automation up to 80% of their manufacturing line

3) Revenue, Gross Profit, ASP
- Revenue in Q4 Drop due to the drop in ASP for medical glove. Medical / healthcare glove ASP in Q4 for Riverstone was at USD37 per carton. In March 2022, the price is now USD25-30 with gross profit margin down to 20%. Management believe there's more room to trend durther down from USD25 but that depends on raw mat prices as well as competition from China. Management highlights that at these prices, distributors are returning and buying.
- Management did say that China are selling at USD20-21 in March but ASP at that level currently, it'll be hard to breakeven.
- Pre Covid, the lowest gross profit margin for medical glove Riverstone used to do was 17%.
- For cleanroom glove, there's not much diff in ASP and it is still trading at more than usd 110.
- Practice of ASP revision for cleanroom glove normally happen quarterly. There's room for it to trend down along with the reducing raw mat (Butadiene) cost.
** Q4 Split revenue, Gross Profit, GP Margin:
Revenue - Cleanroom 40% medical 60%.
Gross Profit - Cleanroom 62% Medical 38%
Margin - Cleanroom 57%, Medical 25%
** Full year split revenue n Gross Profit:
Revenue - cleanroom 25%, medical 75%.
Gross Profit - cleanroom 23% medical 77%.

4) Cleanroom Glove
- Riverstone is a market leader in this space especially class 10 and 100. Margin should be able to be kept at high level. Currently there's order backlog due to labour shortage
- Riverstone will try to switch more lines to cleanroom. Max capacity right now 2b – 2.5b pieces per annum, depending on class of cleanroom glove / product
- Barriers to entry is high as cleanroom glove needs 3 processes instead of 1, requires more labour, customisation on formulation, consistency in supply, etc
- In 2020 / 2021 - many cleanroom manufacturers switched their lines to take advantage of high medical glove prices. Riverstone was one which remained their cleanroom operations. This enable them to get new clients
- On main drivers of cleanroom glove going forward: they will try to get new clients; new products within the cleanroom segment; more markets within the same client i.e. TI Philipines..


** Site Visit **

A) We visited Eco Medi Glove, the healthcare division and found that almost the entire glovemaking process is automated. Only packaging part needs more manual labour.

b) We went to the foreign labor dormitory - it was impressive. The dorm was equipped with gym, canteen, first aid centre, football / futsal / basket ball / badminton court, groceries. Every house was equipped with 2 toilets and max capacity of 6-9 people. Staff are able to leave in and out of the compound freely. The best thing is - these was built n provided for years before Andy Hall and foreign labour issues lingers in the industry! Another impressive thing was - nearby there was a dormitory for local teachers, it did not look as good as Riverstone's foreign worker's dormitory! Talk about best practices and respect for foreign labour - Riverstone definitely showcase this.

c) Another thing to note is Riverstone focuses on long term relationship with suppliers and customers. Early Covid period, Riverstone didn't deal with spot buyers but continued to supply to their long term customers at fair prices. This caused their ASP to be lower than the likes of $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) or $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) leading to lower top and bottom line, but now that role is reversed, customers are now sticking to the company and some even let Riverstone sell at higher than market prices. This is why Riverstone is selling at higher than peer prices of medical glove.

d) Riverstone actually started with cleanroom glove first, before they diversified into medical glove. Now that medical glove dynamics are changing, they will focus on clean room glove once more. Interestingly, Riverstone from since they were listed (close to 15 years), ALWAYS received questions about the barriers to entry to cleanroom - about competition coming into the space and disrupting them but until now, are still holding market leadership in this segment.

e) We visited to plant 3 - there will be 3 facilities for expansion of 21 lines in total. This would be sufficient to help Riverstone's planned capacity growth until 2024 to a total of 15b pieces of growth - realistic and not too ambitious / spoil the market.

** Conclusion **

All in all, 2022 will see many glovemakers struggle. Riverstone is no exception - their profit will be lower than the highs of 2020 and 2021 but I believe they will remain profitable due to their diversity and position in the cleanroom glove segment. Not many glovemakers will be. They will also have a sound balance sheet - strong enough to overcome what potentially could be market downturn in the next few years. They are and will continue to be a cash cow - allowing the company to pay good dividend, especially if earnings are good. If the latest dividend is of any signal - the management is a generous one.

I think Riverstone could challenge getting RM300-400m net profit for FY2022. It's currently trading at 10-15x PE of FY22, potentially paying at least 4% yield from current level.

The stock had gone up 10% alone today - on the day RM0.10 dividend goes ex (another big one coming in May). It could be due to increasing Covid case in China, it could be some technical trades - but underneath it all, Riverstone is a fundamentally sound stock, run by honest, great & fanatic management who focus on delivering value and quality to all stakeholders from foreign employees to suppliers to shareholders.

Tagging: @Jasonsum @FIRLGuys @leonjakelim @maxtan @Jinnsern @mengteck @wsk20 @zhexiangxd @mikeleong

$SGX-AP4 Riverstone @Ryunanda

RIVERSTONE $SGX-AP4 - One Resilient Glove Company. Paying 17% dividend yield.

Riverstone released Q4 Result late in the evening, and the result shows resiliency. Riverstone registered a Q4 PAT of RM110m (-58% QoQ, -67% YoY).

To put this into context, in the recent calendar Q4 of 2021,

- HARTA (2nd largest listed glovemaker in Malaysia) hit RM259m PAT, 72% down QoQ
- KOSSAN (3rd largest listed glovemaker in Malaysia) hit RM218m PAT, 59% down QoQ
- SUPERMX (4th largest listed glovemaker in Malaysia) hit RM48m PAT, 93% down QoQ
- RIVERSTONE (5th largest listed glovemaker in Malaysia) hit RM110 PAT, 58% down QoQ
- COMFORT (6th largest listed glovemaker in Malaysia) was at a loss before tax
- TOPGLOVE (largest listed glovemaker in Malaysia) hit RM186m PAT in Sept to Nov (excl Dec 21), down 69% QoQ

In other words, considering their production capacity, their result is as remarkable as KOSSAN in extremely challenging Q4 2021. Riverstone resiliency is partly driven by their cleanroom glove which seems to still be in growing stage.

Cash (net cash since debt is as good as 0), stands at RM1.6b or about 47% of market cap.

Some of the cash will be distributed as dividend, 38c in total or SGD12.25c or 16.7% yield based on last closing price. Riverstone release their result on the same day as $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD) which - despite their cash horde is giving 0 dividend. Speaks volume really...

Riverstone also - from their financial year end, will be the least impacted on the cukai makmur. A plus point vs peers like HARTA

Whilst the good times of supernormal profit for medical nitrile glove is over, and challenges persists - what we have in Riverstone is a healthy and well run company - probably one of the lowest cost producer of glove with a product segment (cleanroom glove) that's still relevant and growing steadily.

Will be joining their briefing and will have a follow up note. I'm staying invested.

cc: @yungwei @Nyago @andy721 @kimkuan @JJ23JJ @mengteck @D240z @asheryap @bleong711 @v147 @kuanbuo @intrawinata @jiunwai @LGoh @zhexiangxd

$SGX-AP4 Just realised the QR is out today, haven't really read deep into it but on first glance the dividends are really exceeding my expectations :astonished: I was only expecting around MYR 30sens based on management guidance previously, which is already good enough for me to buy in before but the bonus special dividend gives a yield of up to 17% based on today's closing :money_mouth_face:
Earnings looks risilient on the surface too...there must be a reason why this glove stock is still giving positive returns YTD! Will dig deeper tomorrow @Ryunanda

$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) lost the test of time

@eddilee11 just like @andy721, TOPGLOV did worse than my personal bearish expectation. As much as many thought the worst was over for TOPGLOV when CBP ban was lifted, fact from this quarter shows that has not been the case for the company. Sales volume remained low and ASP dip faster than expected, for the company. CBP ban uplift may have a laggard impact, but from my channel checks - TOPGLOV had been and still is one which is selling lower than everyone else.

@takanoamin as much as I do not like to comment on this matter, but it's increasingly visible that the 2 points you mentioned had hurt them badly. TOPGLOV's excessive buyback program at high prices now look a really bad move from the management from all angles. The 1.2c dividend was at 50% payout but due to lower profit, this is below expectation as well..

@terence775 @andy721 @v147 unfortunately, I believe you guys may be right - when it comes to "balance sheet strength", TOPGLOV has the lowest net cash per market cap ratio vs its peers. One of the reason is this stems from them paying generous dividends earlier on. Whilst it's not wrong, but unlike their peers who paid less generously, it can be marked as the management was alone in reading the normalising trend "wrongly". This could also be supported by TOPGLOV coming out now and mentioning about being "cautious and defer its expansion plans to be in line with market trends and the demand supply situation." I used to be curious on why RIVERSTONE is not being more aggressive on their expansion plan, now I understand that they're being REALISTIC and do not want to "spook" the market which undoubtedly Topglov and (Chinese makers) to some extent had done.

Net Cash to Market Cap:
TopGlov: 8%
Harta: 26%
Kossan: 55%
Riverstone: 64%
Supermax: 83%

*Silver Lining* - @jimboy178 Yes the speed of ASP normalisation is really unexpected. This largely is due to customer spending pattern, due to overstocking, as well as due to TOPGLOV selling at lower prices. But the "disappearance" of demand will soon come back, imo. TOPGLOV will gradually regain its exports to the U.S, customers are expected to gradually replenish their stocks from normalising ASPs, means sales volume will improve slowly over time.

From what I gather as well, ASP had found bottom at USD23 few weeks ago and now settling around USD30.

I personally had cut my TOPGLOV position at around -50% loss year to date. Whilst my exposure in TOPGLOV had became small vs overall port, this was still painful and a lesson to take in.

All in all, whilst I still see downside for TOPGLOV from the points mentioned earlier, I see some other glovemaker stock prices are bottoming. I remain a believer in the long term prospects of the glovemakers, especially with $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) and RIVERSTONE $SGX-AP4 (even $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)) and will look to replenish my position in this sector to 10% of overall portfolio in 2022 in due course. Buy when others are selling.

For TOPGLOV, I believe long term prospects of the company (2 years plus) as a business (not share price) is still intact. I believe they will be the one that can come out of this episode with the steepest learning curve. TOPGLOV will still remain the top / global leader in glovemaker and command one of the lowest cost producer of glove.

Sharing my journey, Rondy.

$SGX-AP4 RIVERSTONE Q3 corp presentation slides

RIVERSTONE $SGX-AP4 - Commendable Q3 2021 Result. Shows Resiliency. Briefing takeaways.

**1) Business, finance, ASP.**
a) In Q3 Clean room v medical gloves:
Profit contribution 30% v 70% ; Volume contribution 20% v 80%; Asp $120 v $69 average; GPM 58% and 54% in Q3
b). Production volume - q3 achieved total 1.95b of gloves... down from 2.5b a year ago. Breakdown: 350m clean room 1.6b healthcare gloves.
c) ASP has been reducing every month. Dec avg 33-35 usd. More room to adjust downward slightly cos raw mat continue to drop.
d) Gross Profit margin will normalise to about 20-25% sustainable level for Riverstone. At this margin, other producers can only breakeven or even loss making. This is higher than precovid margin of about 15%.


**2) CLEANROOM Gloves**
a) Clean room consistent. Order remains strong. Riverstone Can’t fulfill customer orders at the moment cos they have backlog of order from Q3. In Q3, the company faced MCO challenges and workforce was limited to 60%, they also had to close down plant for 10 days.
b) Additionally, in Q4, they're facing labor shortage issue. Overall, aiming for 400m deliveries in Q4.
c) Cleanroom barrier to entry is high. It will take 12-15 months to build facility (with dipping line). Not easy to convert dipping line from medical to cleanroom cos there's risk of cross contamination as chemical used varies. Competitive advantage is there, especially from formulation. Customer approval will take about 1 year.
d) Target is still 500m deliveries per quarter
e) Margin may not be as high as Q3 going forward, but margin reduction will not be like healthcare glove. It should sustain above precovid margin of 40%.

** 3) HEALTHCARE GLOVES**
a) Healthcare glove order had been slow from aug onwards but RIVERSTONE is seeing good signs going fwd - a lot of customer resume order in dec.
b) Customer in Q3 was having wait and see approach. but this behaviour can change v fast. Past 2 weeks, things seem to resume and back to normal.

**4) Utilisation**
a) Aug to Nov was slow and at 70-75%. Seeing Improvement in dec. Q4 utilisation average is at 75%
b) OVerall utilisation should be at 90% in feb / march when customer buying pattern normalise.

**5) Cost**
a) RIVERSTONE's cost per 3.5g nitrile glove now at usd25. Cost in line with raw material. Currently, they're seeing different prices from different supplier, range is around $1300-1700 per tonne. Going fwd average should be in the range of $1300. Q3 avg raw mat cost was at $2100
b) Long run Malaysian hv advantage over China. China in the past have got raw mat supplier which produces cheaper cost / lower quality. Malaysia v China raw mat supplier gap have since become smaller. In short as raw mat advantage diminish, Malaysia glovemaker should enjoy lower cost.
c) In terms of Energy, labour - Malaysia is not at disadvantage situation.
d) Gas price - Riverstone 60% fuel cost depend on fossil gas. 40% from biomass. They have seen 20% increase in gas price.

**6) TAX**
a) Will be imposed next financial year. Additional 9% above RM100m threshold.

**7) CASH / DIVEDEND / EXPANSION**
a) Cash to be used partially for expansion purposes until 2024. Target is 15b gloves per annum
b) Each phase they will need RM80-100m.. They're also looking to upgrade automation to reduce manpower.
c) Expansion had been delayed by 6m to 1y due to various challenges in construction.
d) Balance for dividend. Will be declared in Q4. Payout should be the same as last year.

**8) CBP Ban / Export to US / ESG**
a) Riverstone not in the risk. They believe they're doing a good job to foreign workers. Mentioned that Riverstone is a benchmark in the industry.
b) Sales to US 40% healthcare. 30% cleanroom
c) ESG efforts: reduce water usage; Reduce wastage; Emission reduction (solar panel + biomass); Worker hostels with gym, indoor sports arena, first aid room, barber shops, grocery shops and laundry services. Foreign employee also get yearly and special bonus, free meals + mobile data, training and giving them higher education. Certified / compliance by SMETA
d) Riverstone also sets up ESG committee.

**Verdict**:
All in all, I came out from the briefing feeling positive. Mr WTS as usual is very objective, stating the situation as it is. Normalisation WILL happen. Times of supernormal profit IS OVER.

Riverstone healthcare gloves have got 20-25% cost advantage over peers. Additionally they still have their cleanroom gloves which continues to be strong. Operation cash flow is strong, net cash over market cap now is now around 50%. Going forward, who would you champion when investing in rubber glove makers? Mine is RIVERSTONE.

cc: @yungwei @Nyago @andy721 @kimkuan @JJ23JJ @mengteck @D240z @asheryap @bleong711 @v147 @kuanbuo @intrawinata @jiunwai @LGoh