Expect 3Q to be Equally Positive
Intrinsic Value S$0.680
Prev Closing S$0.630
Riverstone posted outstanding 2Q FY13 results with revenue and PAT rising 15.5% and 31.2% YoY to RM90.4m and RM14.4m respectively. Both figures formed 48.5% and 59.2% of our previous forecasts. This set of results was backed by several favorable industry factors, namely continuous decline in raw material prices and favorable exchange rate between April and June 2013. We expect the former to sustain and contribute a healthy gross margin for Riverstone. For the latter, the US$/RM rate climbed from 3.08 around April 2013 to around 3.15 in July 2013. It is now hovering at approximately 3.23, suggesting more forex gain for this quarter. 3Q results are likely to be pleasant.
On the CAPEX front, the company has begun construction on their new site at Taiping (which was purchased in April 2013 for about RM12m) and will commence its first phase of operation in mid-2014. We have adjusted our FY13F gross profit and PAT upward and assumed some expansion estimates into our FY14 and FY15F. Maintain Invest with an intrinsic value of S$0.680.
Results Summary: 2Q revenue continued to climb as Riverstone managed to fully deploy all the new capacities that were installed in late 2012 and utilization rate remained high for the period. Together with lower raw material prices, gross profit increased 42.5% YoY to RM24.1m. Selling and distribution expenses grew 30.5% YoY for the period while general and administrative expenses grew 27.7% YoY - lower than that of gross profit. There was also RM1m forex gain. Consequently, PBT rose 48.3% YoY to RM18.1m.
Cash equivalents for the period remained relatively unchanged as the RM11.8m cash flow from operating activities and RM9.1m proceed from warrants conversion were mitigated by RM7.1m purchase of PPE and RM13.9m dividend distribution. 61.9m warrants were issued on 5 Aug 2010 and will expire on 2 Aug 2013. A total of 61.7m warrants were converted prior the expiry and increased the number of shares outstanding to 371.2m. Riverstone recommended a dividend of 2.3 RM cents for the interim period, 0.1RM cent more than the corresponding period.
Publish date: 05/08/13