Riverstone unfazed by massive healthcare glove oversupply

Its competitors are expanding rapidly.

Mainboard-listed Riverstone Holdings remains unfazed by the oversupply of healthcare gloves in the market. According to Maybank Kim Eng, the firm has to deal with aggressive capacity expansion by its competitors in Malaysia, where big glove makers are suffering from intensifying competition.

The report noted that Riverstone’s management intends to avoid head-on competition by focusing on customised products and quality-conscious customers in Scandinavian countries.

“Management shared that its close relationships with end-users via direct supplies, ability to customise solutions, best-in-class product features and stringent qualification formed strong barriers to entry. Better-than-expected penetration of the equally profitable lower-end cleanroom glove market is expected to boost its growth. This could provide upside to our forecasts,” stated the report.

Here’s more from Maybank Kim Eng:
Higher elongation gloves for better comfort and low-chemical-content gloves that reduce allergic reactions are examples of its differentiated products. It also tries to serve customers with demanding CSR audit requirements,which place much more emphasis on the treatment of workers.

In addition, given its much smaller current and future capacity than peers, Riverstone should be able to continue selecting customers which offer the best ASPs.

Riverstone’s 12x FY15E EPS trails peers’ 15x average, although it is has the strongest EPS growth prospect. We expect catalysts from better-than-expected cleanroom glove volume, with higher ASPs and margins.