“We cut EPS by 7-12% after lowering our gross margin assumption to reflect the more challenging and competitive environment,” says Cheong.
However, there could be several bright spots. These include favourable USD/MYR whhich could offset some cost and competitive pressures; future penetration of new markets like the US and Japan as well as the high barrier of entry for cleanroom gloves which should help Riverstone maintain stable market share and attractive profits.
Meanwhile, the construction of Rievrstone’s phase four capacity should start in 2H17. ‘We think that its differentiated products can fetch decent demand, at the expense of lower gross margin, amid this oversupply period,” says Cheong, “Management is confident that it can fill up the new capacity based on currently projected customer demand.”
Shares of Riverstone are up 1 cent at 92 cents.
