Riverstone Holdings

Sources: Annual Report 2025 (five-year financial highlights); results announcements for FY2023 and FY2025; FY2021 press release. FY2025 condensed figures are unaudited as announced and match the Annual Report 2025 highlights.

Income statement

Revenue CAGR from FY2021 to FY2025 was −24.6%, which reflects the unwinding of the pandemic peak. On the post-normalisation base, from FY2022 to FY2025, revenue CAGR was −7.6%. The company reports no dilutive instruments, so basic and diluted EPS are identical.

Operating profit and EBITDA

EBITDA is operating profit plus depreciation of property, plant and equipment.

Commentary. The five-year record has three phases. FY2021 was an exceptional pandemic year: prices and volumes for both glove families spiked, and the gross margin reached 61.9%. In FY2022–FY2023 prices normalised and the industry ran into post-pandemic oversupply. Revenue fell 70% over two years, but the gross margin held above 32%. That shows the cleanroom cushion: as healthcare prices collapsed, the higher-margin cleanroom business became a larger share of the mix. FY2024 was a cyclical recovery led by restocking in semiconductors and consumer electronics, and gross margin reached 36.4%. In FY2025 the gross margin fell to 30.0%. The group cited three causes: lower healthcare prices amid Chinese competition, sharp ringgit appreciation against the US dollar (revenue is in dollars, while more than 60% of costs are in ringgit), and a temporary rise in raw-material costs. Other income has also fallen, from RM31.2 million in FY2023 to RM20.4 million in FY2025, because the cash pile has shrunk with heavy dividends and fixed-deposit rates are lower. Overheads are tightly controlled: selling, general and administrative expenses were only about 5% of revenue in FY2025.

Quarterly trajectory

Sources: Quarterly press releases and results announcements for 1Q2024–2Q2026, and the 1H2026 corporate presentation.

The inflection in 2Q2026 is the most important recent data point. Revenue rose 24.5% from the previous quarter to RM266.7 million and net profit rose 60.2% to RM65.8 million. The gross margin recovered to 36.0%, above any quarter since 2Q2024. Management attributed the 1H2026 gross-margin gain, to 32.9% from 29.7% in 1H2025, to better average selling prices. Riverstone passed through the rise in butadiene and acrylonitrile feedstock costs that followed the Middle East conflict, rather than absorbing it.

Balance sheet

Goodwill and intangibles are not separately reported. The group has grown organically and carries no acquisition goodwill. Short-term debt and long-term debt are both nil.

At 30 June 2026, total assets were RM1,628.0 million, cash RM576.0 million, equity RM1,444.1 million and lease liabilities RM1.2 million. Inventories rose to RM142.5 million from RM87.3 million at end-2025, because of higher raw-material prices and deliberate stock-building. Net asset value per share was RM0.97.

Commentary. The balance sheet is very conservative. There are no bank borrowings, the current ratio is above 9x, and cash made up about 38% of total assets at end-FY2025. The decline in equity, from RM2.33 billion at end-2021 to RM1.48 billion at end-2025, is deliberate. Dividends have exceeded earnings in every year since FY2022, returning the pandemic windfall to shareholders. Management says it aims to keep RM500–600 million of cash on the balance sheet as a long-standing practice, not a formal policy. Cash at 30 June 2026 of RM576 million sits in the middle of that range, so future distributions will be paced more closely to earnings than in FY2022–FY2025.

Cash flow

Sources: Results announcements for FY2023 and FY2025; FY2021 press release.

In 1H2026, operating cash flow was RM102.4 million (1H2025: RM150.6 million). The fall reflects the inventory build. Capex was RM12.0 million and dividends paid were RM133.4 million.

Commentary. Operating cash flow has been steady at about RM300 million a year in FY2024–FY2025, and free cash flow at about RM220–230 million. Cash conversion is high: operating cash flow was 147% of net profit in FY2025, helped by depreciation and by lower receivables. Capex is modest for a glove maker. Annual spending has stayed around RM50–135 million since the Phase 7 and Phase 8 programmes were scaled back, compared with roughly RM65–71 million of annual depreciation. There have been no share buybacks: treasury shares were unchanged at 2,736,000 over FY2022–FY2025.

Ratios

ROIC is NOPAT (operating profit × (1 − effective tax rate)) divided by equity less net cash. The FY2021 ROIC uses net profit as NOPAT. Working-capital days are based on cost of sales (inventories, payables) and revenue (receivables) at year-end. Net debt/EBITDA is shown as net cash/EBITDA because the group has no debt.

Commentary. Returns remain well above the cost of capital despite the earnings decline. FY2025 ROIC of 24.6% excludes the large idle cash balance, and is far above the low-single-digit returns of most Malaysian generic-glove makers. ROE is held down by the cash. On an ex-cash basis it would be in the mid-20s percent. The cash conversion cycle has lengthened from 33 days in FY2022 to about 60 days in FY2025, because receivable days rose as cleanroom customers, who typically have longer payment terms, became a larger share of sales. Interest coverage is not meaningful, since finance costs come only from small leases.

Management guidance

Management gives no numerical guidance. Its commentary for 2026 says the long-term outlook is positive, supported by sustained cleanroom demand from AI infrastructure and data centres, and that healthcare customers are building inventory ahead of expected supply-chain disruption. Raw-material costs were expected to normalise from 2Q2026, which happened: the 2Q2026 gross margin was 36.0%. The CEO expects cleanroom volume to grow about 10% a year over the next one to two years. Management continues to describe the environment as one of price competition, currency swings and volatile raw-material costs, and is monitoring US tariffs.

Consensus expectations

The four-analyst consensus is a Buy, with an average target of S$1.01, about 31% above the S$0.77 share price on 8 October 2026. UOB Kay Hian raised its FY2026–FY2028 earnings forecasts by up to 14% after the 1Q2026 results, on higher selling-price assumptions. CGS International assumes price increases of up to 15% for 2026. The 1H2026 net profit of RM106.9 million annualises to about RM214 million, slightly above FY2025.

Bull case

1. Recovery led by cleanroom. The 2Q2026 gross margin of 36.0% and quarter-on-quarter profit growth of 60.2% suggest the low point in margins has passed. With cleanroom utilisation at about 75% and roughly 800 million pieces of new capacity, cleanroom volume growth of 10% a year could lift its share of revenue above 50% and push group margins back towards the FY2024 level of 36%.

2. Better structure in healthcare gloves. The 100% US tariff on Chinese medical gloves, Intco's price increases and the narrowing price gap with China improve pricing for the roughly 70% of Riverstone's healthcare output that goes to the US.

3. Yield with optionality. The stock trades at about 17x forward earnings, compared with 25–30x for Hartalega and Top Glove. It offers a dividend yield of about 7% from a debt-free balance sheet, and holds RM576 million of cash, roughly 17% of its market value.

Bear case

1. The ringgit as a structural headwind. Ringgit strength alone cut 1Q2026 revenue by 15.1%. With more than 60% of costs in ringgit, continued appreciation could absorb any gains from higher prices.

2. Cleanroom is no longer a niche to itself. Kossan is building cleanroom capacity and bought distributors in Riverstone's Thai stronghold, and Ansell reports strong cleanroom momentum. More competition could compress the cleanroom glove net margin, now above 20%, which supplies 70% of group gross profit.

3. Dividend reset risk. Cash has fallen from RM1.07 billion to RM576 million, close to the RM500–600 million floor. Future dividends must come from earnings alone, so payouts above 100% are unlikely to continue and the yield could fall towards the earnings yield of about 6%.

Key catalysts and monitorables (next 12 months)

Nov 2026: Catalyst or monitorable: 3Q2026 business update; What to watch: Whether the 2Q2026 gross margin of 36% holds. Cleanroom volume growth

4Q2026: Catalyst or monitorable: New biomass boiler commissioned; What to watch: Energy-cost savings and the effect on emissions

Feb 2027: Catalyst or monitorable: FY2026 results and final/special dividend; What to watch: Total FY2026 dividend against 17.0 sen for FY2025. Payout ratio

1Q2027: Catalyst or monitorable: Kossan completes its Inout acquisition; What to watch: Pricing behaviour in Thai cleanroom distribution

Ongoing: Catalyst or monitorable: USD/MYR exchange rate; What to watch: Main driver of reported earnings

Ongoing: Catalyst or monitorable: HDD and NAND production at Seagate and Western Digital; What to watch: Leading indicator of cleanroom glove orders

Ongoing: Catalyst or monitorable: US tariff policy on Malaysian and Chinese gloves; What to watch: Healthcare price spread

Ongoing: Catalyst or monitorable: Butadiene and acrylonitrile prices; What to watch: Pace of cost pass-through

2026–2027: Catalyst or monitorable: Ramp-up of six new lines (about 800 million pieces) and six customised cleanroom lines; What to watch: Utilisation and pricing of new capacity

Analyst verdict

Riverstone's competitive position is better than its recent financial record shows. Revenue has fallen for most of the five years since the 2021 peak, net profit fell 27.6% in FY2025 and the share price is broadly where it was at the end of 2021. Those headline numbers hide a business whose economics have shifted towards cleanroom products. Using one-fifth of its capacity, Riverstone earns about 70% of its gross profit, with net margins more than twice those of the leading Malaysian glove makers. Its cleanroom customers in HDD, semiconductor and data storage are seeing demand rise with AI infrastructure.

The 2Q2026 results are the first concrete evidence that the trough has passed. Gross margin recovered to 36.0%, net profit rose 60.2% from the previous quarter, and the group showed it could pass on a petrochemical cost spike of up to 102%. Riverstone also has advantages that the large commodity producers lack: no debt, about RM576 million of cash, and a history of paying out all earnings.

There are real counterweights. The currency mismatch is structural, not cyclical, and has repeatedly been the main driver of reported results. The cleanroom niche is attracting larger, cash-rich competitors, most visibly Kossan. The era of payouts above 100% is ending as cash approaches management's RM500–600 million floor, so investors should expect dividends to track earnings from here.

On balance, at about 17x forward earnings and a yield of around 7%, the market appears to price Riverstone as a dividend-paying glove stock rather than as a specialist supplier to the semiconductor and storage supply chain. If cleanroom volumes grow at the targeted 10% a year and the ringgit stabilises, earnings could return to the FY2024 level of about RM287 million within two years, which would support the consensus target of about S$1.01. The key indicators to watch are cleanroom utilisation, the USD/MYR rate and competitors' behaviour in Thailand. On current evidence, the risk-reward is moderately favourable, with downside cushioned by the balance sheet and the dividend stream.