Riverstone performed well in 2Q’13 with sales rising 16% to RM90.43mln and profit rising 31% to RM14.4mln, bringing 1H’13 sales up 13% to RM171mln and profit up 27% to RM26mln.
This is slightly ahead of expectations and reflects better than expected productivity improvement as well as favourable raw material prices.
Good working capital management saw operating cash flow rise slightly for 1H13 to RM21mln, more than enough to offset capex of RM8mln, giving a free cash flow of RM13mln.
The company continues to be debt free with net cash of RM91mln.
Interim dividend was raised from last year’s RM2.2 cents to RM2.3 cents.
Looking ahead, the company will be increasing their production capacity further in 2014 by another 20% to cater to the rising demand from both the electronics and healthcare sectors.
Notwithstanding the still bright outlook, the stock has done well, having risen close to 30% since our initial buy recommendation early this year and is coming close to re-testing its all time closing high of 68 cents achieved in mid-2010.
At 12x PE and 4% yield currently, we think valuations are looking fair in the near term and believe the 68 cents peak in mid-2010 will see the stock resisted and likely to consolidate its gains.
Downgrade to HOLD as we believe the stock will likely be range bound in the near-medium term.
Publish date: 06/08/13