While the Straits Times Index (SGX: ^STI) may be one of the better-performing indices this year, some stocks in the Singapore market have suffered steep share price declines.
One of these is Riverstone Holdings (SGX: AP4).
The glove maker saw its share price tumble by nearly 37% year-to-date (YTD) to its 52-week low of S$0.68.
This fall came after the group posted a heady performance in 2024 with a share price gain of 52%.
Can Riverstone revisit its highs, and is the business a good candidate for you to add to your buy watchlist?
A pandemic boost
Recall that all glove players enjoyed a substantial boost to their revenue and profitability during the COVID-19 pandemic.
Back then, demand for healthcare gloves soared, with many of the glove manufacturers reporting record profits amid an industry boom.
Riverstone also enjoyed a big surge in demand for its healthcare gloves and saw its revenue for 2021 hit RM 3 billion while net profit came in at RM 1.4 billion.
The group’s share price hit an all-time high of S$2.35 back in August 2020, and was hovering around S$1.50 by January 2021.
Riverstone has both a clean room glove division and a healthcare division, and both were beneficiaries of the pandemic.
The clean room division thrived because of strong demand for electronics amid the wave of digitalisation sweeping across the globe.
Hence, the business was benefitting on both fronts as it rode the wave to prosperity.
For 2021, Riverstone declared a total dividend of RM 0.48, comprising a core ordinary dividend of RM 0.38 and a special dividend of RM 0.10.
Fall from grace
Unfortunately, the subsequent plunge in demand for gloves saw Riverstone fall from grace.
As the world exited the pandemic, demand for gloves also normalised, dealing a significant blow to the glove manufacturing sector.
In 2022, Riverstone saw its revenue fall 59.1% year on year to RM 1.26 billion while net profit plunged 77.8% year on year to RM 314.4 million.
A total dividend of RM 0.34 was paid out for 2022.
2023 saw the continued fall in demand for healthcare gloves, and many players were eliminated from the sector, with demand and supply slowly reaching an equilibrium.
That year, Riverstone saw its revenue tumble 27.4% year on year to RM 914.8 million while net profit continued to slide, falling by 30% year on year to RM 220.4 million.
Despite the continued fall in net profit, the group still paid out RM 0.175 in ordinary dividends along with a special dividend of RM 0.05.
Investors should note that this payout is still significantly higher than its pre-pandemic (2019) dividend payment of RM 0.074.
2024 saw a rebound in the group’s fortunes.
Revenue rose 17.3% year on year to RM 1.07 billion, with net profit surging 30.2% year on year to RM 286.9 million.
For 2024, Riverstone paid an ordinary dividend of RM 0.20 and a special dividend of RM 0.04.
Net margin compression
2024’s performance seemed to indicate that the year might be a turning point for the business.
However, the first quarter of 2025 (1Q 2025) saw Riverstone report a 21.8% year-on-year fall in net profit despite a tiny 1.1% year-on-year uptick in revenue.
These financial numbers got investors worried as they fretted over higher costs incurred by the business, which wiped out its revenue gains.
Riverstone was also demonstrating declining net profit margins since its peak year of 2021.
Back then, the business saw net margin hit 46% because of economies of scale amid the surge in demand for gloves, helping to strongly boost utilisation rates.
By 2022, the net margin had fallen sharply to 25%, and then slipped to 24.1% by 2023.
2024 saw a slight rebound in Riverstone’s net margin to 26.7%, but 1Q 2025 saw net margin fall to 22.4%, the lowest since the pandemic ended.
Investors, however, should put things in perspective.
Riverstone’s 1Q 2025 net margin of 22.4% was still significantly higher than its 2019 (pre-pandemic) net margin of 13.2%.
The group’s net profit of RM 56.4 million already makes up 43% of 2019’s net profit, even though just one quarter has passed.
The business also declared an interim quarterly dividend of RM 0.03 for 1Q 2025, close to half of the total dividend paid out in 2019.
Simply said, the business is now on an even stronger footing compared to pre-pandemic days.
Pushing on with expansion plans
CEO Wong Teek Son is optimistic about the group’s future as he sees growing demand for generic healthcare gloves.
Riverstone has been adjusting its product mix to cater to this demand since the fourth quarter of 2024, and the group is on track to commission three new healthcare production lines by the second half of this year.
The CEO attributed the margin compression to the shift in product mix, but reiterated the group’s intention to push out customised products with better profitability.
Also, Riverstone acquired new clients for its clean room business and expects this to contribute to both revenue and margins.
If investors stay patient, they should see better financial numbers from Riverstone soon, and its share price could rebound in line with these results.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
