Riverstone Holdings

[Belg]

That's was what happened to China's sports wear and apparel sector in 2011. The industry was growing at double digit pace for many years and everyone expanding their production capacity and opening hundreds of new stores every quarter. When supply far outstripped demand, their revenue plunged double digit, their margins shrunk and they closed down stores by the hundreds every quarter. Anta stock price tanked from more than 18 HKD to almost 4 HKD in less than a year. It had since rebounded to a high of 18 HKD before retracing to 15+ after major shareholders pared stake. The previous number 1, Li Ning, had fallen deeply into the red and is still spilling more red ink than ever.

The same thing can happen to the nitrile glove industry in the next 1-2 years.

Will the nitrile glove behave as the sport wear in China i.e. over-capacity issue? This is very important question, as we aware the expansion plans of major nitrile producers in Malaysia, the largest exporter of nitrile glove.

Nitrile glove has a unique characteristic over latex glove, which is critical for the targeted industries, e.g. ESD sensitivity, puncture resistant and long shelf time etc. The trend of moving from latex to nitrile has started years ago, and the trend is continue and accelerating as observed.

IMO, there are sufficient motivation to sustain the trend. The next logical question, has the company sufficiently wide moat amid the competition? I am convinced that the company is well-placed for the challenge, with HDD glove market as a stabilizer, while extending to healthcare sector, where the nitrile glove is definitely a preferred glove, and more so after the nitrile's price goes below latex's.

(not vested)

All very good points. I am always waiting at the side lines to start acquiring some shares into Riverstone.

Correct me if I am wrong, Riverstone didn't get into any rights issues or likewise equity dilution to get onto their current expansion blueprint. This is a major plus as their management has planned for this long ago and executed it to due diligence.

If Malaysia is going to be the largest exporter of nitrile gloves, then all the more that I am putting my money on Riverstone. From reports, it seems Riverstone got into nitrile gloves production much faster than competition. It has been a technology hassle then when ah bang, adi are all quite happy doing their latex gloves while Riverstone needs to be nimble enough to venture into nitrile.

Let's see if Riverstone can truly come out of its own during this incoming economic correction.

[CityFarmer]

All very good points. I am always waiting at the side lines to start acquiring some shares into Riverstone.

Correct me if I am wrong, Riverstone didn't get into any rights issues or likewise equity dilution to get onto their current expansion blueprint. This is a major plus as their management has planned for this long ago and executed it to due diligence.

If Malaysia is going to be the largest exporter of nitrile gloves, then all the more that I am putting my money on Riverstone. From reports, it seems Riverstone got into nitrile gloves production much faster than competition. It has been a technology hassle then when ah bang, adi are all quite happy doing their latex gloves while Riverstone needs to be nimble enough to venture into nitrile.

Let's see if Riverstone can truly come out of its own during this incoming economic correction.

FYI, Bursa's listed Hartalega has done earlier and faster than Riverstone, in nitrile glove. Hartalega produces nitrile glove at lower cost than Riverstone, probably due to volume, and wider deployment of robotic in production.

Riverstone is catching up, and we have seen the declining COS, or improving GPM, and the improvement will continue, IMO

One of the Riverstone's moat is on its sale strategy, a more direct approach, rather than via distributors as Hartalega has done.

[Belg]

All very good points. I am always waiting at the side lines to start acquiring some shares into Riverstone.

Correct me if I am wrong, Riverstone didn't get into any rights issues or likewise equity dilution to get onto their current expansion blueprint. This is a major plus as their management has planned for this long ago and executed it to due diligence.

If Malaysia is going to be the largest exporter of nitrile gloves, then all the more that I am putting my money on Riverstone. From reports, it seems Riverstone got into nitrile gloves production much faster than competition. It has been a technology hassle then when ah bang, adi are all quite happy doing their latex gloves while Riverstone needs to be nimble enough to venture into nitrile.

Let's see if Riverstone can truly come out of its own during this incoming economic correction.

FYI, Bursa's listed Hartalega has done earlier and faster than Riverstone, in nitrile glove. Hartalega produces nitrile glove at lower cost than Riverstone, probably due to volume, and wider deployment of robotic in production.

Riverstone is catching up, and we has seen the declining COS, or improving GPM, and the improvement will continue, IMO

One of the Riverstone's moat is on its sale strategy, a more direct approach, rather than via distributors as Hartalega has done.

CF, Thanks for the info. I see it as long as the piece of pie is there big enough for everyone, there is money to be made in nitrile gloves.

Riverstone's moat would be crucial as they directly deals with the customer, resulting in high customer's satisfaction and high responsiveness. It would hopefully pares a way for them to boost their business. Dealing with resellers vs factory is a totally different experience, I would deal direct with factory anytime.

[CityFarmer]

CF, Thanks for the info. I see it as long as the piece of pie is there big enough for everyone, there is money to be made in nitrile gloves.

Riverstone's moat would be crucial as they directly deals with the customer, resulting in high customer's satisfaction and high responsiveness. It would hopefully pares a way for them to boost their business. Dealing with resellers vs factory is a totally different experience, I would deal direct with factory anytime.

I like the newly "contracted production line" concept as reported by analysts during the recent factory visit. It is an important step forward in the company sale strategy.

[Xiaosaint]

I have been looking at Riverstone recently. Financially sound with good track record.

But my concern is whether there is any real economic moat at all. As a lab user, I use a lot of nitrile gloves in my line of work. However, i notice that there is little to no brand awareness in that as long as it is nitrile gloves, we are happy to use them. As such, the company's focus during procurement is mainly the price. This makes nitrile gloves somewhat like a commodity whereby the one that can sell you the cheapest gloves win.

I'm not sure if this is the same case as those in the industries that require cleanroom facilities though. But the "contracted production line" concept sounds like a good way to mitigate revenue fluctuation

-Not vested-


Sent from my iPhone using Tapatalk

[CityFarmer]

I have been looking at Riverstone recently. Financially sound with good track record.

But my concern is whether there is any real economic moat at all. As a lab user, I use a lot of nitrile gloves in my line of work. However, i notice that there is little to no brand awareness in that as long as it is nitrile gloves, we are happy to use them. As such, the company's focus during procurement is mainly the price. This makes nitrile gloves somewhat like a commodity whereby the one that can sell you the cheapest gloves win.

I'm not sure if this is the same case as those in the industries that require cleanroom facilities though. But the "contracted production line" concept sounds like a good way to mitigate revenue fluctuation

-Not vested-


Sent from my iPhone using Tapatalk

One of the moats of the company, is the company ability to manufacture highly-customized products with more and less similar cost structure. It needs a established process to do it, with its volume and unit price. The process involves sale, R&D, and production departments, which is indeed a real challenge to copy by competitors.

FYI, I am not aware any competitors of the company having the same level of process for product customization. Hartalega didn't has it at all.

Next valid question is, do the customers need the value-added service? Well, HDD sector needs it, and the company has been providing the service to their key customers in this sector

Do the healthcare sector need it? I reckon the service is highly demanded, with the engagement of healthcare customers in new production lines.

(not vested, but waiting)

[Belg]

I have been looking at Riverstone recently. Financially sound with good track record.

But my concern is whether there is any real economic moat at all. As a lab user, I use a lot of nitrile gloves in my line of work. However, i notice that there is little to no brand awareness in that as long as it is nitrile gloves, we are happy to use them. As such, the company's focus during procurement is mainly the price. This makes nitrile gloves somewhat like a commodity whereby the one that can sell you the cheapest gloves win.

I'm not sure if this is the same case as those in the industries that require cleanroom facilities though. But the "contracted production line" concept sounds like a good way to mitigate revenue fluctuation

-Not vested-


Sent from my iPhone using Tapatalk

One of the moats of the company, is the company ability to manufacture highly-customized products with more and less similar cost structure. It needs a established process to do it, with its volume and unit price. The process involves sale, R&D, and production departments, which is indeed a real challenge to copy by competitors.

FYI, I am not aware any competitors of the company having the same level of process for product customization. Hartalega didn't has it at all.

Next valid question is, do the customers need the value-added service? Well, HDD sector needs it, and the company has been providing the service to their key customers in this sector

Do the healthcare sector need it? I reckon the service is highly demanded, with the engagement of healthcare customers in new production lines.

(not vested, but waiting)

I like the way they move prudently with little added debt to finance a land acquisition and production line. Very business-like and firm with good future income stream.

[rokcradle]

I have been looking at Riverstone recently. Financially sound with good track record.

But my concern is whether there is any real economic moat at all. As a lab user, I use a lot of nitrile gloves in my line of work. However, i notice that there is little to no brand awareness in that as long as it is nitrile gloves, we are happy to use them. As such, the company's focus during procurement is mainly the price. This makes nitrile gloves somewhat like a commodity whereby the one that can sell you the cheapest gloves win.

I'm not sure if this is the same case as those in the industries that require cleanroom facilities though. But the "contracted production line" concept sounds like a good way to mitigate revenue fluctuation

-Not vested-


Sent from my iPhone using Tapatalk

From my very layman and logical understanding:
- Say a HDD drive cost $20 to manufacture.
- Cost of gloves is maybe 10 cents.
- Any slight contaminant will render the drive unsellable

So, if I am a HDD manufacturer, I would stick with my trusted glove supplier of 10 years with a track record. Spoilage is just too expensive for me to try to cut costs on gloves. Actually, even if my trusted supplier increases price with inflation every year, I will take it. After all, cost of gloves is 0.5% of COGS.

This is the moat that I reckon Riverstone has in the cleanroom segment

[Jacmar]

Dear all
This is a gentle reminder to RSVP for Riverstone’s 3Q results briefing if you will be interested in attending.

1. We are pleased to inform that Riverstone Holdings Limited - SGX: AP4 (“Riverstone”) will be announcing its financial results for the third quarter ended 30 September 2014 (“3QFY2014”) on 4 November 2014 after market closes and will be conducting a results briefing on Wednesday, 5 November 2014, 1000hrs. During the results briefing, the management will be providing updates about phase I of their expansion plans and subsequent plans going forward.

2. Malaysia-based Riverstone is a leading manufacturer cleanroom gloves used in highly controlled and critical environments as well as premium nitrile gloves used in the healthcare industry. With an annual production capacity of 3.1 billion gloves as at 31 Dec 2013, it maintains a high utilization rate of 85 – 90%.
3. Kindly find below some of the key highlights of Riverstone:
i. Riverstone’s industry leading position for high-tech (contamination-focused) clean room gloves for HDD and semi-conductors, commanding at least 60% of world’s market share
ii. Adopting a two-pronged approach by growing its presence in corrosion-focused cleanroom gloves for the mobile, tablet and LCD panels’ market
iii. Competitive edge and expansion into premium healthcare gloves
iv. Commissioning of production lines from first phase of expansion plan
v. Consistently strong financial performance with sustainable profit margins (historical average of 26 – 28%)
vi. High dividend payout ratio of 40-50% since listing in 2006

4. Details of the results briefing are as follows:

Date: 5 November 2014
Time: 1000 – 1130 hrs
Venue: 4 Robinson Road #04-01 The House of Eden Singapore 048543

5. As seats are limited and offered on a first-come-first-served basis, it would be appreciated if you may RSVP by Wednesday, 29 October 2014, 1700hrs.

We look forward to your participation, please.

Thank you.

Regards,

Stephanie Chong | Associate | Financial PR | Singapore's No. 1 Investor Relations Firm

[Bubbachuck]

An article about the company's moat:

http://www.fool.sg/2014/07/09/this-glove...ow-exists/