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Tuesday, 26 May 2020

(Tradeview 2020) Historic Pandemic Glove Rally - Riverstone Holdings Ltd (AP04) Continue Flying Under The Radar

Riverstone posts 24% rise in 1Q earnings to S$10.8 mil on higher ...

Dear fellow readers, 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :

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Long Term Value Pick 2020 : Riverstone Holdings Ltd. (Fair Value SGD $ 2.00) 

Many have already been covering glove and related topics. Some writers are very bullish, some are arguing it is highly overvalued and pending a crash. However, this wont be my topic today. I would leave it to others to argue the case of Hartalega, Topglove, Kossan, Supermax or Comfort.

Today, I would just like to focus on Riverstone Holdings Ltd. Even as we speak, Riverstone has broke my initial fair value of SGD $ 2.00. It is now surging towards $2.20. 

Many have wrote to me, thanking me for highlighting Riverstone. Indeed, I was among the first to highlight Riverstone many months back when it was trading between SGD 80-95 sens range. But the person investors should be thanking is the professional management under the stewardship of the chairman, Mr. Wong. 

Now the questions now appeared to be focused towards asking me anxiously whether I will revise upwards my target price / fair value. This is what happens when a share price is surging in a relief rally. As the stock keep making new highs, investors who are in the money (profiting) whether 20% up / 50% up / 100% up, taking profit seems to be a problem for most investors. 

Taking profit and cutting loss are two of the hardest things to do or master for investors. This is especially true for new investors. So in such situation what is my advice?

Be ruthless in cutting losses, be patient when taking profit 

One must learn how to sit on profits. This is provided the company is a good company and the results justify so. A multi-bagger means a share or company that can increase in value multiple folds. Those who have invested in such companies know it is very hard to come by and find a gem like that. When you do come across and find one like this, you should hold on until there is a fundamental or structural change to the company. 

For us Riverstone fulfils our criteria of a Long Term Value Pick, hence when we called the shares, it wasn’t to invest short term but rather to hold it for some time. Of course, when we first spotted Riverstone, the Covid-19 was even declared a pandemic by WHO yet. Fast forward till today, globally the death toll is fast reaching 350k and confirmed cases hit 5.5 million. This is a pandemic of unrivalled scale in recent times hence, under extraordinary circumstances, this sector has performed extraordinarily defying most expectations. I have seen the results of Hartalega, Kossan, Supermax which was announced recently. I will use the announced results (YoY) as roughy guide to show you the strength of Riverstone. 

1. Supermax - Revenue Grew 23% & Net Profit Grew 105%

2. Riverstone - Revenue Grew 16% & Net Profit Grew 54%

3. Hartalega - Revenue Grew 14% & Net Profit Grew 27% 

4. Kossan - Revenue Grew 9% & Net Profit Grew 10%

5. Topglove - awaiting results 

However, I know the true value of Riverstone does not ride only on the industry tailwind but it the management value, philosophy and vision. I can assure you, Riverstone did well not because of pandemic alone that happen to came along. It was very well managed company that was never in most investors radar as it is a humble, low profile, hardworking under the radar company. If you look at the chart below, this is not a company that did well based on stroke of luck / pandemic hitting every alternate years, otherwise the chart will show fluctuation points. The chart can show you that it has been always growing and performing steadily.

There are many factors why we like Riverstone as explained in our earlier article. For those who missed it, you can read it here :

Whilst I set my initial fair value for Riverstone to be $2.00, I noticed CGS-CIMB has increased the TP to $2.50, DBS TP is %2.20, and UOB Kay Hian TP is $2.15 (After publishing my article, UOB revised TP upwards by 18% to $2.53). For now, I will not amend my FV until I can see the next quarterly results in early /mid August 2020. I can only say this to those who want my view on Riverstone, to me, Riverstone is a multi bagger and long term stock hence I will continue to hold. That’s my personal opinion. For those who are happy with profits, just take it and be happy with your winnings. 


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Wednesday, 20 May 2020

(Tradeview 2020) - 2 Months Later, ”Cash Is King”, Time to Sell?

Dear fellow readers, 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :

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Before, I get into the details, a quick refresher. On 24th March 2020, I posted this article "Cash Is King, Time To Deploy?". It was one of the articles that received wide attention. For those who missed it, the link attached as below :

In the article I wrote at length about the meaning of " Cash Is King", importance of having "dry powder" / "war chest" so it can be used at time of needs. 5 days earlier, I wrote about - Recession is finally here? Or is it an Opportunity of A Lifetime? For those who missed it, the link attached as below :

Now 2 months later, on 20th May, the picture is entirely different from back then. I am sure most people can see from the charts below that the market within this 2 months has undergone an intense V-shaped rebound. 

There are many reasons as to why this has happened but today I would like to just keep this article short and focus on showing you all the outcome since 2 months back when we deployed our cash reserves and make big investments into the stocks of our choice. In between, we added stocks along the way. Similarly, we also called to sell on strength. This list is the same as the one we shared in our public articles to everyone. (Feel free to cross check against our articles above as we are honest & transparent to all)

We previously shared the following stocks as our favorite as at 24th March 2020 vs the price today 20th May :

1. CCK - RM 0.34 vs RM 0.51 (50% Gain)

2. OCK - RM 0.38 vs RM 0.56 (47% Gain)

3. RCE Capital - RM 1.46 vs RM 1.85 (27% Gain)

4. DKSH - RM 1.92 vs RM 2.60 (35% Gain)

5. Riverstone Holdings Ltd (Singapore listed) - $ 0.80 vs $ 1.76 (120% Gain)

6. Pintaras Jaya - RM 2.25 vs RM 2.77 (23% Gain)

7. GCB - RM 1.90 vs RM 2.75 (42% Gain)

8. MFCB - RM 3.67 vs RM 5.95 (62% Gain)

9. Scicom - RM 0.605 vs RM 1 (65% Gain)

10. RHB Bank - RM 4.94 vs RM 4.76 (-4% Loss)

11. Pentamaster - RM 2.83 vs RM 4.43 (56% Gain)

12. Public Bank - RM 15.24 vs RM 15.42 (1% Gain)

13. QL Resources - RM 6.97 vs RM 8.48 (22% Gain)

Our total gains of +42% exceeds KLCI rebound of +17%. 

**Please note our gains measured excludes dividend gain, and some stocks we bought at lower price / average down, some stocks we have sold. Some we are still holding. Our subscribers would know.

The purpose of our writing is not to brag but to show proof of our investment philosophy "investment based on fundamentals will give you the sufficient confidence to deploy cash to invest during the worst of a crisis."  Now, based on various reasons that we have shared over the course of our writing, we feel this is a very good time to realise our gains. Of course, many would have their own opinion and views. We may not be necessarily right simply because if indeed a vaccine is found, the market will rally further. If the Government extends the ban on short selling and margin call, the market will continue moving upwards. If US continues stimulus packages in tandem with global Central Banks, there may still be legs to this rebound rally. 

However, it is our view as a Fundamentalist and value investor that the current market has moved to a point whereby all earlier negatives priced in the share drop have been cancelled out in the share rally. Yet, the negatives in the economy remains and fundamentals of the companies' are not reflected sufficiently in its share price. 

We think there will be protracted period required for economic recovery and we think the commercialisation of vaccine will take longer than 9 months. Therefore, we would like to sell on strength, realise the gains and increase our cash holdings once again to above 50-60% level. That way, in the event the market sells off again, we have enough cash to reenter the market. For shares that we intend to continue holding long term for the dividend yield and growth are like Oriental Holdings Bhd. and Riverstone Holdings Ltd. These companies are the kind I would say multi-bagger, value stocks and most importantly, holding such investments, I can sleep well at night. I like this saying during a rally. It's by Jesse Livermore - "The top is never in sight when the vision is vitiated by hope"

Do stay tune for our next write up on “Principles of Investing - Rule 4 :  "Be Cynical, Be Sceptical & Avoid Tips”


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20 Inspirational Ray Dalio Quotes | Quotes | TraderLion

Saturday, 16 May 2020

(Tradeview 2020) Why is KLCI Bursa Stock Exchange Trading At Record High Volume?

Dear fellow readers,  

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :

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These are amongst the many questions that I received from my readers :

1. Why is the KLCI stock exchange making new record high in terms of trading volume? 
2. Who are trading and who are the net buyers? 
3. Are we in a bull market? 
4. What should we do? 

I will attempt to give a reasonable explanation and answer to all of the above questions.  Data and numbers will give us the answer we are looking for should we make a reasonable inference and hypothesis from it. Have a look at the data below :

15 May 2020 : Volume 9.3 billion, Value RM 3.9 billion

14 May 2020 : Volume 7 billion, Value RM 4.1 billion

13 May 2020 : Volume 9.7 billion, Value RM 5.2 billion

After making a record high volume and value on Wednesday, 13 May 2020, the market once again return to a high volume and value on Friday, 15 May 2020. The last time the stock exchange hit such high volume and value would be back in August 2014. At that point, KLCI was making fresh record high and KLCI reached 1892 points. Where are we today? We are at 1403 as of Friday. 

If you look at the volume from 13th May to 15th May, the volume fluctuate from 9.6 billion to 7 billion then back to 9.3 billion. But what is most interesting is the value. The value has been diminishing from RM5.2 billion to RM3.9 billion. This is despite the KLCI index closing at higher 1403 points on Friday compared to 1397 points on Wednesday.

Logically, if your trading volume rises, your trading value should rise as well not fall. This shows the trades have moved from high value stocks to low value stocks. Or in layman terms, from first liners to third liners. In such situations, it would only mean one thing, funds are less active buyers (especially foreign funds) and retailers have taken over as net buyer. Well, I am sure some of the readers may not agree with me. Some may argue I am just making a general assumption. Thankfully, I have facts to show the data : 

This is from April 2020 statistics :

From both data above, it shows local retailers have overtaken the Bursa KLCI stock exchange as the largest participants in the market in terms of value and volume traded. What is even more interesting, foreign funds have been selling non-stop, local institutions appear to be playing a supporting role (support the market) BUT retailers are net buyers.

My question to all now, is this not a dangerous signal? Are retailers outwitting local funds, foreign funds and understand the market better than them in terms of investing in the share market? Why are Foreign funds selling endlessly, local funds are merely supporting and retailers buying non-stop? 

Based on our findings and research, we have come to the following conclusion on why KLCI Bursa is hitting record high volume. 

1. The record low interest rate environment following BNM rate cut to 2%

This has spurred retailers to move their savings / fixed deposit to equities market in search of higher returns. We saw the 12 months Fixed Deposit rate by Public bank is currently 2%. As a saver, many would not want to put their savings in the FD for a meagre 2% return and  rather move the funds into equities which may give 4-5% dividend yield. With KLCI having beaten down badly in 2020, many think buying low is safe as value has emerged from stocks which would ordinarily be expensive in terms of valuation to consider a good investment. 

Risk: However, I believe this batch of investors of prudent fundamental investors are the minority. Many punters or inexperience investors who are speculating in penny stocks with poor earnings & track record (ex - Ageson, Ho Wah Genting etc)

2. 6 months loan moratorium by BNM & I-Lestari EPF Scheme 

The BNM policy’s objective was to alleviate individuals and businesses from lack of income due to Covid-19 and MCO lockdown. With the 6 months window of breathing space, individuals and businesses has no loan repayment obligations to be made. This cause the surge in liquidity / money supply into the market for disposable use or investment purposes. We do not believe that BNM’s purpose of doing so is to encourage businesses & retailers to use the money which would otherwise be used for loans repayment to speculate in the share market. Additional withdrawal of EPF funds is for the people to get through MCO and potential unemployment. The additional funds was not supposed to be used for the share market. However, this is the byproduct or side effect of the economic policies when the M2 increase in the economy as a whole. 

Risk: This is akin to using 6 months of borrowed money to speculate / invest in the share market. Should the market plunge again, those who are caught will lose money and face even greater challenge in repaying their loan obligations. Future savings in EPF for old age will also dwindle.

3. FOMO - Fear Of Missing Out

This issue is the same globally. When the market went through sharp rebound due to the large stimulus package by US Fed and Central Banks around the world to mitigate against the impact of Covid-19, the share market started to rebound. Investors who was worried about missing out this long awaited recession quickly set up trading accounts and rush into the market. This is like a stampede, where people are charging ahead in herd mentality without any sense of rationality moving with the flow. It is a vicious cycle. This stampede will only result in one outcome - blood. Speculative mania are signals of irrational exuberance which in effect are warning signs to all of us.   

Risk: What happen when the music stops? I think you all know the answer to that
5. Extended Duration of MCO Lockdown And Lack of Income

The extended period of lockdown imposed by the government which was almost 8 weeks long meant many people were sitting home doing nothing. Businessman could not run their business. Employees would have more free time compared to having a fixed hour day job.  Like many who have picked up cooking or baking as a healthy pastime, the time on hand allowed people to explore the possibilities of the share market. Additionally, the lack or fall in income has resulted in businessman and those affected to speculate in the share market hoping to make money to cover for shortfall and daily expenses.

Risk: Once the lockdown is over and all sectors are running, people would return to their daily jobs and have less time for the share market. This would result in reduction in participation in the market consequently downtrend. 

6. Closure Of Casino, 4D Betting House and Various Vice-Businesses

The closure of the above mentioned premises means there are absolutely no opportunity to gamble. This consequently resulted the funds from this segment of the economy to flow into the share market. This in effect has turned the share market into a legal gambling arena. After all, punting and speculating in the share market based on hearsay and tips are no different from gambling right?

Risk: This segment of money would eventually flow out as well once things are back to normal

7. Proliferation of Syndicates, Misleading Articles and Fake News 

Due to the interest in the share market, we have observed a spike in nonsense promotional articles by unknown authors, rise in market cyber troopers / keyboard warriors, fake deals and news announcements by listed companies with poor track record and earnings. All for the purpose of pushing the share price of the stock and manipulating the market via pump and dump operations. Even syndicates appears so obviously unlike before, where it was more subtle. 

Risk: Many inexperience and new investors who are in the market will unknowingly  suffer substantial losses. In fact, when you look at August 2014 KLCI record high volume, many were penny stocks being played up. Many names are no longer to be seen today such as Sumatec, PDZ, it looks grossly similar to what it is today.  

8. Regulators Have Halted Short Selling and Margin Call

To be very frank, this is one of the decisions we are adamantly against. Free market forces are there for a reason. It is to ensure equilibrium exist. Having short selling will allow the market to function more efficiently and in fact reduce the ability of syndicates to conduct pump and dump operations. When the market is one way, not both ways, the tendency for it to go higher is there. However, if there are huge opposing force (short sellers), they function to clear the market of its inefficiencies hence resulting in a more reasonable and less speculative market. Also, without the fear of being forced into margin call, those who are using margin facilities will not worry and when the market continues upwards trend, their margin facility grows allowing them to push more funds into the same upwards direction without fear of the repercussion of margin call. That is extremely unhealthy.

Risk: Once short selling and margin call is reintroduce, the impact will be greater than before as the market is filled with greater inefficiency waiting to be corrected. 

Our Advice To Readers :

We are not suggesting all to stay away from investing in the market. We are also not saying there is no value stocks to invest. In fact, there are many good companies with good dividend yield and strong track record worth our consideration should we are prepared to hold for the long term horizon. This is also the best opportunity to build a portfolio of  stocks with recurring dividends / income. These are many blue chip names which we are familiar with be it banks, consumer sectors, insurers and what not which are too expensive in the past to invest. Today, value has emerged for collection. Sadly these are not the stocks being invested by retailers.

On the contrary, it is the lousy speculative stocks with poor track record that is hogging the limelight today. Thematic plays have taken over news flows and fake misleading postings by syndicates are also being widely circulated and shared across platforms It has even come to a point where dubious MOU and deals are being announced by companies to Bursa. There was 1 day last week, I remembered reading 3 separate listed companies venturing into healthcare PPE / Covid testing kits business. In just 1 day. And what was common between these 3 companies? None of them had good track record, experience or ability to be in this field. 

I am not bothered if funds or syndicates lose money. What pains me are ordinary people and retailers who are inexperience and new in investing losing their hard earned money in this extraordinarily trying times. Do be careful and not let greed take over your sense of rationale.


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Monday, 11 May 2020

(Tradeview 2020) Long Term Value Pick 2 - Riverstone Holdings Ltd (AP04) Greatness Lies in Humble Roots

Medical Nitrile Examination Gloves Manufacturer,Cleanroom Bags ...

Dear fellow readers, 

This is my Long Term Value Pick for 2020. 

Once again, these writings are just my humble highlights (not recommendation), feel free to have some intellectual discourse on this. You can reach me at :

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Riverstone posts 24% rise in 1Q earnings to S$10.8 mil on higher ...

Long Term Value Pick 2020 : Riverstone Holdings Ltd. (Fair Value SGD $ 2.00) 

We primarily invest our funds in KLSE stocks. However, over the years, we have been investing across markets globally and have found some good investments in foreign markets. The reason for this is because the KLSE have been downtrending over the years and lack of catalyst and foreign participation. Whilst most of our investment are still primarily in Malaysia, it is good to have investments abroad to provide some hedge from domestic risk as well.  

Today, I would like to talk about Riverstone Holdings Ltd. I am sure everyone has heard about the "4 Kings" of the glove sector in Malaysia, namely Hartalega, Topglove, Kossan and Supermax. The smaller or niche players in the sector includes Comfort, Rubberex, Careplus and Adventa (has sold Aspion to Topglove). These are the listed names. There are also others which are not listed with some market presence such as YTY and WRP. So how about Riverstone? Well, this  company must be one of the most low profile, high quality and huge potential that we had the opportunity of discovering. Occasionally, there are hidden gems waiting to be discovered by those who look further. Riverstone is one of them and it is listed across the causeway - SGX. 

1. Humble Beginnings

Riverstone Holdings Ltd was listed in SGX in 2006 at the price of SGD $0.13. Today it reached a high of $1.48 over the course 15 years. This is a capital gain of 11.38x (excluding dividend gains). This is nothing short of an amazing growth and more importantly, this Malaysian owned glove company with a market capital of SGD $1.07 Billion (RM 3.3 Billion) is not even listed in Malaysia. 

Today, when people talk about the glove sector, Malaysians are very proud because Malaysia controls almost 65% of the world market share. However, what people do not see are the hardship and challenges that the glove makers overcome to become world leaders today. Riverstone is a story of grit, perseverance and innovation. Mr Wong Teek Son, the Chairman and founder of the company comes from humble beginnings. His family were farmers and he worked his way through school and graduated from University Malaya with a Bachelor of Science. 

Mr Wong did not immediately start his own business right out of school. In fact, it was never part of his plan. The company was founded in the midst of an economic crisis when the company he worked for closed down and he was able to use their production lines. At the time, competition in the industry, was intense. There were at least 300 glove factories in Malaysia and many could not survive resulting in closure. Together with partner Lee Wai Keong, he formed Riverstone Resources to focus on the manufacture of cleanroom natural rubber and nitrile gloves using advanced production techniques.

2. Growth, Innovation and Expansion

Since 1994, Riverstone Resources has pioneered the manufacture of gloves using nitrile latex in Malaysia, introduced online glove chlorination technology and developed nitrile finger cots using its own proprietary production technique. The company is a market leader in cleanroom gloves and over the years have ventured into medical gloves as well. To insulate revenues, Riverstone diversified into healthcare gloves. Although cleanroom gloves command better margins, demand for healthcare gloves is more resilient. Pharmacies, hospitals and clinics continue to use gloves even in a downturn, said Mr Wong in an interview with Singapore The Straits Times in 2016. True to his vision, with Covid-19 pandemic sweeping across the world, Riverstone has been playing a key role in the world supply of medical gloves. 95% of all products manufactured by the company is for the export market. The major clients of Riverstone includes Western Digital, Intel, Seagate, Cardinal Health amongst others. 

In addition, the company grew from just a manufacturing facility in Rawang, it has now total of 5 facilities located in Taiping, Thailand, and Wu Xi, China. From 2016 where the annual production capacity was 6.2 billion gloves per annum, with the latest completion of the healthcare glove facilty in Taiping (Eco Medi Glove), the company has reached an annual capacity of 10 billion gloves. Their products are also wide ranging. Apart from the staple products like Clean Room gloves, Sterilize gloves and Medical gloves, there are also consumables such as Cleanroom Fingercots, Packaging Bags, Face Masks, Cleanroom Wipers (Oem) and other Disposable Products. 

We had the opportunity to visit the Taiping facility. What impressed us most is the state of the art automation, efficiency and cleanliness of the the manufacturing facility. In addition, the company is extremely serious in ensuring the welfare of the employees / workers are taken care of. The workers’ hostel is also well built. From our understanding, the company complies with Europe's high standard on workers rights protection down to even a plug placement location is taken into consideration.   

3. Outstanding Financials and Balance Sheet (Updated with Q1 2020 Results)

Besides a good growth story, what we like most compared to other glove makers is the strong financial numbers and balance sheet of Riverstone Holdings Ltd. In short, some companies which are growing and doing well, they take on debts to fund their growth. For Riverstone, the company utilises internal funds and reinvest profits hence has minimal borrowings despite the ongoing expansion over the past few years. It is a high growth net cash company. This is what is most valuable to us as it allows us to have peaceful sleep at night without worrying about high gearing ratio. Have a look at the numbers below :

Riverstone has cash and equivalent of RM 130 million and borrowings of RM 13 million, which means it is net cash of RM117 million. Debt to equity is only 0.016. In addition, the cashflow from operations is close to RM160 million. If you look at the topline growth, it is growing at CAGR of 15.3%. It is true that the net profit and dividend growth is minimal over the past few years, this has to do with the company expanding capacity using internal funds instead of leveraging up on debts. Furthermore, if you compare to other of Malaysia's "4 Kings" glove makers, Riverstone has one of the best average profit margin of 13.5% along the likes of Hartalega compared to Topglove around 9.3%, Kossan 9.6% and Supermax 8.2%.   

If you look at the ROE, it is 16.52%, and the current ratio is impressive at 3.1x.  Riverstone also consistently declared dividend at least for the past 10 years which shows the companies' willingness to share profit with shareholders despite having to reinvest profits for expansion. Even so, the company was able to maintain a dividend yield of at least 2+%, As I have shared before, one of the most important factors to consider when investing is to study the dividend growth model as that is the way to assess whether the company is sharing profits with the shareholders. 

At today’s price of SGD$1.45, it is the highest level since IPO and it broke out from the previous of SGD $ 1.28. Please note that when we first shared the stock with our readers in previous articles, Riverstone was only trading at 20x PER around SGD 87 sens. If we summarise the financial numbers, it can be read as below based on trailing quarters :

PER = 25x 

Dividend Yield = 1.91%
NTA = SGD 35 sens
Beta = 0.64
Net Cash = RM 117 million
ROE = 16.52%
Earnings Growth = 6.6%

However, after releasing the article today, only then I found out Riverstone released their Q1 2020 voluntary results announcement. 

The results above speaks for itself. Revenue grew YoY by 16% to RM 279 million, net profit by 54% amounting to RM47 million. If converted to EPS, it is around SGD $ 0.20. Assuming we annualised this by 4 Quarters, it is $0.80 for full year. At current price of $1.45, it is only trading at 18x. At 25x PER, Riverstone fair value should be worth SGD $2.00.

4. Future & Continuous Growth Potential  

From the shareholding above, the top 20 largest shareholders controls up to 94% of the shares. Whilst it fulfill the public float requirement with about 33%, it is still rather low liquidity. 

However, this stock is clearly a beneficiary of Covid-19 pandemic and the ever changing landscape of healthcare, hygiene and sanitisation. We believe that Riverstone will only continue to grow and potential is limitless with new markets and demand globally. Even if the demand may normalise once a vaccine is found, the behavioural change is set in motion just as how SARS pandemic brought about different approach when it comes to utilising PPE and attitude of healthcare professionals in handling patients.

Furthermore, the company is a market leader in Cleanroom glove segment for semiconductors, technology and relevant ancillary sectors. In the event a vaccine is found and demand for medical gloves reduces, the demand pick up from the semiconductor and technology sector will still lead the way and further benefit the company's growth

Kossan Rubber Industries Berhad - Home | FacebookHartalega | LinkedIn
SUPERMAX CORP BHD ] - Golden Chance After Huge Plunge ??? - J4 ...            Top Glove Q2 profit up 9.3%, expects strong quarters ahead

This is a very unique company. It is a Malaysia company with MNC global clients. It is not known as among the "4 Kings" of glove makers in Malaysia although it was founded in Malaysia and it should rightfully be in that category.  If not for it being listed in SGX, more Malaysian investors would know about the company and hence more Malaysian institutional funds would invest in the company. Riverstone in terms of production capacity is not as big as Hartalega, Topglove, Kossan or Supermax, but the net profit is actually higher than Supermax. In addition, Supermax has a market cap of RM 4 billion at 38x PER multiples, if we were to apply the same valuation to Riverstone, it would easily exceed Supermax to hit almost RM 5 billion in market cap.    

5. Value Growth Investment 

Therefore, although Riverstone has broken out and hit a historic high in view of upcoming QR and ex-dividend date, our long term fair valuation for is SGD $2.00 based on the back of EPS of SGD $ 8 sens at 25x future PER for FY21/22. This is excluding the positive of their cash holdings, consistent dividend, new expansion of manufacturing facility with 92% utilization rate and positive increase of 20% in demand due to Covid-19. This is our prudent estimation for a net cash high expansionary company. For those who are worried the price is too high, you can always put in your watchlist and collect on weakness. We called a buy on this stock last year end 2019 and added more during the recent selldown in March 2020.

The difference from other companies, the founder is still involved in day to day operations. On top of that, he is part of the R&D team due to his knowledge in chemistry. Being hands on allowed the company to do well as all nitty gritty of the daily operations are taken into account when formulating business strategies. We like the company just as much as we like the founder who is humble, honest, hardworking and knowledgeable. For those who likes such a company and would want some overseas investment exposure, one can consider Riverstone Holdings Ltd. as your long term value pick. We are personally invested and we believe this company will keep growing. This is a stock which I want to and am happy to own a small part of the business for a long time to come. 


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peter lynch quotes - Trade Brains