The analysts at RHB Bank Singapore Research and UOB Kay Hian have maintained their “buy” calls on Riverstone Holdings AP4 following the release of their 1QFY2024 results ended March 31.
While the Singapore research team at RHB Bank Singapore Research have maintained its target price of 93 cents, UOB Kay Hian’s John Cheong and Heidi Mo have upped their target prices by 12 cents from 88 cents to $1.00.
In their report dated May 13, the UOB Kay Hian analysts note that Riverstone’s 1QFY2024 results were “above expectations” as they displayed consistent growth for the fifth consecutive quarter. Riverstone’s revenue and earnings for 1QFY2024 increased by 4.8% y-o-y to RM249.5 million ($71.21 million) and 54.5% y-o-y to RM72.2 million respectively.
“The growth in revenue stemmed from greater demand in the cleanroom gloves segment, in tandem with the recovery of the semiconductor and consumer electronics industries,” say Cheong and Mo.
Riverstone’s core profit also stood above the RHB team’s expectations, given that the company’s results for the first half of the year are usually “seasonally weaker”. In their May 10 report, the team notes that gross profit grew 7.2% q-o-q while gross margin increased by 13.1 percentage points (ppt) y-o-y resulting from a better product mix and higher average selling prices (ASP).
For the quarter, Riverstone declared an interim dividend of 4 sen, which represents a payout ratio of 82.1%.
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To the UOB Kay Hian analysts, the dividend came as a positive surprise.
With this, they anticipate Riverstone’s FY2024 - FY2026 payout ratio to exceed 100% to reward its shareholders, backed by its “healthy” cash balance of RM947.6 million which is an estimated 21% of Riverstone’s market cap.
Cheong and Mo’s estimates mean that Riverstone’s dividend yield will be at an “attractive” 7.7% for FY2024.
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Looking ahead, the analysts at UOB Kay Hian and RHB Bank Singapore are upbeat on Riverstone’s prospects.
Cheong and Mo see increased sales volumes for Riverstone’s both segments with a further anticipated recovery in the consumer electronics and healthcare glove industries.
RHB continues to like Riverstone for its “unique exposure in the cleanroom segment, above-industry margins profile, and consistent dividend payouts”.
Like its peers at UOB Kay Hian, the RHB notes the recovery in the global semiconductor industry.
“According to the Semiconductor Industry Association, global semiconductor industry sales chalked up US$47.6 billion ($64.49 billion) during February, which represented a 16% y-o-y increase,” says the RHB team.
“The continuation of strong y-o-y growth (following 15% growth in January) indicates that the global semiconductor sector is experiencing a secular recovery trend – fuelled by a series of tech companies’ regional expansions, pick-up in sales from China, and the increasing adoption of cleanroom gloves beyond the traditional life science industry,” it adds.
“That said, we believe RSTON is strategically positioned to reap the low-hanging fruits of robust demand from the hard disk segment, as well as the consumer electronics recovery,” the team continues.
As at 12.44pm, shares in Riverstone are trading 1.5 cents lower or down 1.69% at 87.5 cents.
