市场见解

3 Reasons Why Riverstone is a High-Quality Company

Looking for a high-quality company to invest in for the long term? Here’s one great stock riding strong tailwinds. –

Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based company operating in two key areas of the rubber gloves industry: cleanroom gloves and medical gloves.

In this article, I’ll share with readers three reasons why the company is a high-quality company.

1. Excellent track record

The first thing to like about Riverstone is its stable and sustainable growth over the last decade. Here are some numbers to share.

From 2009 to 2019, Riverstone’s revenue increased from RM 155.7 million (US$36.5 million) to RM 989.0 million, up by 551% during the period.

This translates to a compound annual growth rate (CAGR) of 20.3%. Also, net profit has grown from RM 29.5 million in 2009 to RM 130.4 million in 2019, up by a CAGR of 16.0% during the period.

Though the past results are no guarantee of future performance, I prefer to invest in companies that have a solid track record.

I think Riverstone belongs to that group of companies, and it is well-positioned to sustain its performance in the foreseeable future (more on that in the next section).

2. Growth ahead

As a glove manufacturer, Riverstone is considered a defensive company since its products are needed in both the good and bad times. In other words, its products will grow with the global economy.

Moreover, it operates in an industry with favourable tailwinds. Increasing hygiene standards/regulations, higher demand from emerging markets, and new health threats – the recent Covid-19 outbreak is a good example – are some of these tailwinds that will drive future growth.

To ride the growth tailwind, the glove maker has been investing in new capacity in the last few years, with additional capacity to come on board in the next few years. In other words, Riverstone is positioning itself to sustain its growth mode for many years ahead.

3. Pristine balance sheet

Another thing to like about Riverstone is its strong balance sheet. Here, the idea is simple. Riverstone will need to have enough cash, or the ability to borrow money to satisfy its existing obligations, as well as to invest in the future.

The good news is that Riverstone has a solid balance sheet. As of 31 March 2020, it has RM 92.4 million in cash and cash equivalents and RM 16 million in debt.

Thus, we can see that Riverstone is well-positioned to sustain its financial obligations (such as paying dividends) while maintaining its growth trajectory.

Foolish takeaway

Overall, I think Riverstone is a high-quality company that investors can keep on their radars thanks to the reasons mentioned above.

Still, investors should consider the company’s valuation before making the final call.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga does not own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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