• While Artificial Intelligence (AI) is impacting a broad spectrum of industries in diverse ways, few people can readily figure out how Riverstone Holdings, a glove producer, can benefit.  • Riverstone produces gloves for not just the healthcare sector but also the electronics industry -- where the AI boom is driving growth.• In particular, Riverstone's customers in the semiconductor space, which operate cleanrooms and manufacturing facilities, are enjoying a boost in business from AI-related business, fueling demand for specialised gloves. • UOB Kay Hian reckons that, after a relatively weak 1H 2025 due to not just demand but also unfavourable forex, Riverstone is likely turning a corner and regaining its business momentum. • Read more below.... |
Excerpts from UOB KH report
Analyst: Heidi Mo
AI-Related Demand To Drive Sequential Improvement, Leaving The Worst Behind Us; Upgrade To BUY
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Highlights
• With >100% payout and robust RM602m net cash, dividends remain attractive at an estimated 2026F yield of 7.3%, offering a good entry level.
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Analysis
• AI-related demand to drive cleanroom glove recovery. The cleanroom segment remains Riverstone Holdings’ (Riverstone) key earnings driver, contributing around 40% of revenue but nearly 70% of gross profit.
Management expects around 10% qoq volume growth in 3Q25, supported by stronger demand from the semiconductor and AI-driven data-storage industries.
Customers such as Seagate and Western Digital are increasing output of hard disk drives and NAND devices, which in turn is lifting glove consumption.
With ASPs steady at around US$90/’000s and USD/MYR stable at around 4.25, cleanroom revenue should register sequential growth. Newly commissioned production lines have also come on-stream.
While there is yet to be a full rebound, these lay the groundwork for a more meaningful recovery in 4Q25.
• Softer raw material costs provide margin relief. Based on our channel checks, nitrile latex prices have eased by 3-6% qoq, while prices of key feedstocks acrylonitrile and butadiene have declined 3-4% qoq.
These should translate into 1-2ppt gross margin uplift in 3Q25. As glove ASPs are typically set with a two-month lag, Riverstone is likely to capture most of this benefit in 3Q25, before customer pricing fully adjusts.
• Healthcare margins to edge up. Healthcare volumes are expected to remain flat qoq, but margins should improve modestly.
After product-mix dilution and forex impact in 2Q25 dragged segment gross margin to 13.3%, lower raw material input costs should lift margins slightly.
US demand, which contributes around 70% of healthcare revenue, remains steady, and Riverstone continues to exercise pricing discipline by declining low-margin orders.
This measured approach suggests gradual improvement and provides a stable earnings base as cleanroom gains momentum.
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Company |
Price (@ 7 Oct) (lcy) |
PE (2025) |
PE (2026) |
EV/ |
P/B (2025) |
Yield (2025) |
ROE (2025) |
Net Gearing (%) |
|
Hartalega |
1.1 |
52.4 |
29.7 |
11.8 |
0.9 |
1.5 |
2.0 |
(22.7) |
|
Kossan Rubber |
1.13 |
21.7 |
17.9 |
5.0 |
0.8 |
2.4 |
3.5 |
(44.1) |
|
Supermax |
0.455 |
n/a |
n/a |
n/a |
0.3 |
0.0 |
(3.8) |
(17.5) |
|
Top Glove |
0.57 |
81.4 |
31.7 |
13.2 |
1.0 |
0.7 |
1.1 |
10.2 |
|
Average |
51.8 |
26.4 |
10.0 |
0.7 |
1.1 |
0.7 |
(18.6) |
|
|
|
|
|
|
|
|
|
|
|
|
Riverstone |
0.755 |
17.0 |
15.3 |
8.8 |
2.5 |
6.7 |
14.3 |
(41.3) |
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Source: Bloomberg, UOB KH |
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• Dividend policy backed by strong net cash position. Riverstone has a strong dividend track record, having consistently paid out more than 100% of its earnings (116% in 2022, 151% in 2023, 124% in 2024).
With net cash of RM602m (S$0.12/share) and minimal capex commitments (around RM15m p.a. for 2025/26), Riverstone has ample flexibility to sustain high payouts.
This provides strong support for the stock, even as quarterly earnings recovery remains gradual. Based on our forecast, we estimate an attractive dividend yield of 7.3% for 2026.
•  Heidi Mo, analystUpgrade to BUY with a 38% higher PE-based target price of S$0.98 (S$0.71 previously), pegged to a higher 20x 2026F PE (up from 16x 2025F PE previously), or 0.5SD below its long-term historical mean. This reflects its competitive advantage in cleanroom gloves, superior profitability vs peers, strong balance sheet, and >100% dividend payout policy. • At 15x 2026F PE, Riverstone is currently trading at more than 40% discount vs its peers at 26x, and offers a far more superior dividend yield of >7% for 2026. |
Earnings Revision/Risk
• We trim our 2025/26/27 earnings forecasts by 9%/6%/5% respectively, after factoring in the continued forex impact from the slower-than-expected recovery in USD/MYR weighing on overall gross margins.
Share Price Catalyst
• a) Higher-than-expected demand for cleanroom and healthcare gloves,
b) higher dividend payouts.
See UOB KH's report here
