• Maintain BUY with higher DCF-derived SGD1.22 TP (from SGD1.07), 14% upside and 5% yield. We remain positive on Riverstone's growth outlook, premised on the recovery of global semiconductor sales as well as its differentiated exposure within the healthcare specialty gloves industry, which commands better profitability than generic gloves. Valuation is compelling at 17.8x 2025 P/E, at 0.6SD above its pre-COVID-19 historical mean. Our TP includes a 0% ESG premium/discount as RSTON's ESG score is on par with the country median.
• Outlook. The recovery in global semiconductor sales continues to bode well for the demand outlook of the cleanroom glove industry. This comes after the Semiconductor Industry Association reported global semiconductor sales of USD56.9bn for Oct 2024 (20.6% YoY, +3.5% MoM). Continued robust chip sales indicate that the global semiconductor industry is experiencing a secular recovery trend, fuelled by growth in demand for chips for AI computing (which has a spillover effect on demand for memory and graphics processing), capacity build-up for wafer fabrication, and the increasing adoption of cleanroom gloves beyond the traditional life sciences industry. In the healthcare segment, we expect RSTON to diversify its product offerings towards specialty gloves to yield better margins - specialty products typically command higher ASPs than healthcare examination gloves.
• A differentiated glove player. Unlike other OEM manufacturers, RSTON is the sole glove player that remained profitable even during the industry downcycle in 2022-2023. This is predicated on the group's differentiated product offerings, ie cleanroom and healthcare specialty gloves, which do not experience oversupply. Other differentiating factors include its ability to maintain a consistent dividend payout, offering an attractive yield of 5%.
• Earnings revision and valuation. We make no changes to our earnings estimates. We roll forward our DCF valuation base year to 2025 from 2024 to derive a higher TP of SGD1.22. Our DCF-derived TP implies a 20x 2025 P/E, which is 1SD above its pre-COVID-19 5-year mean. We believe RSTON deserves a premium valuation, premised on the recovery of global semiconductor sales and its differentiated exposure within the healthcare specialty gloves industry, which commands better profitability than generic gloves. During the global semiconductor upcycle in 2018, RSTON's P/E traded at over 1SD above the mean.

Source: RHB Research - 9 Jan 2025