August 08, 2022

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Riverstone Holdings Ltd (Update) - Flying Under The Radar

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

Food for thought: 



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This  information should not and cannot be construed as or relied on and (for  all intents and purposes) does not constitute financial, investment or  any other form of advice. Any investment involves the taking of  substantial risks, including (but not limited to) complete loss of  capital. Every investor has different strategies, risk tolerances and  time frames. You are advised to perform your own independent checks,  research or study; and you should contact a licensed professional before  making any investment decisions.

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