The current PE and PB are ~16 and 3.1 @ price of $1.18. A growth of 1 billion glove a year, means growth rate of 20-25% annually. If all goes well, is the current price too demanding?
The ultimate concern is always on rapid capacity expansion, and the likelihood of ASP price war...
(not vested, and monitoring)
Riverstone downgraded to "reduce" from "hold" by CIMB
SINGAPORE (Feb 27): CIMB ( Financial Dashboard) has downgraded Riverstone Holdings ( Financial Dashboard) to "reduce" from "hold", citing concerns over an increasingly tougher operating environment amid a potential overcapacity in the glove-making industry.
On its part, Riverstone's existing manufacturing capacity is full, even after it added new production lines last year.
The company intends to add capacity for another one billion units by end-2015, bringing total production capacity to 5.2 billion gloves annually.
Meanwhile, its healthcare segment is unlikely to benefit from the stronger US dollar and lower raw material prices, according to CIMB analysts Roy Chen and William Tng, who have a price target of $1.11 on the stock.
"Benefits will be passed through to end-users given the stiff price competition in the segment," they wrote in a note.
That said, they believe gross profit margins for Riverstone's clean-room gloves could "swell" in the near term as competition in that segment is still "benign" and it has a longer-term production contract.
"Nevertheless, we think the current share price has fully priced in the positives," they said. "The potential overcapacity in the healthcare segment remains an overhang."
Riverstone shares were down 0.8% at $1.175 at 3:33pm (0733 GMT).
http://www.theedgemarkets.com/sg/article...-hold-cimb