DBS Group Research analyst Ling Lee Keng has upgraded Riverstone Holdings to “buy” from “hold”, albeit with a lower target price of $1.85 from $2.03 previously.
The upgrade comes as valuations for the counter have become more “attractive” after a correction in its share price.
“Share price has corrected by close to 50% post our downgrade in November 2020. Riverstone is now trading at an attractive 7.3x FY2021F price-to-earnings (P/E), which is near -1 standard deviation (s.d.) of its 5-year P/E average,” says Ling in a Jan 11 report. “Furthermore, we also expect a bumper dividend for FY2020F.”
Ling downgraded her rating on Riverstone to “hold” on Nov 11, 2020, and lowered her target price to $2.03, from her previous figure of $2.76.
See: DBS downgrades Riverstone Holdings to ‘hold’, other analysts still positive
The downgrade was due to the possibility of Riverstone’s share price increase tapering off due to news of the Covid-19 vaccines coming in.
Ling has, however, done an about-turn, as she does not expect demand for Riverstone’s gloves to taper off immediately following the availability of a Covid-19 vaccine, as hygiene remains a key concern globally.
On the reduction in her target price estimate, Ling says the figure is still pegged to Riverstone’s average five-year price-to-earnings (P/E) of 12.8 times, but rolled forward to blended FY2021F/FY2022F earnings to capture the impact that the Covid-19 pandemic has brought to the company.
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Ling also expects Riverstone’s average selling price (ASP) for FY2021F to be “firm” on the back of strong demand and tight supply.
“The ASP increase for January and February is about 5% to 10% month-on-month (m-o-m),” she says. “Order visibility has further extended to December 2021.”
As at 4.30pm, shares in Riverstone are 3 cents higher or 2.2% up at $1.38.
