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Glove makers Riverstone and Top Glove share the honours in sector

The Edge Singapore
The Edge Singapore11/10/2022 12:16 PM GMT+08  • 5 min read
Glove makers Riverstone and Top Glove share the honours in sector
Wong Teek Son co-founded Riverstone Holdings in 1989 and has served as Riverstone’s executive chairman since 2005 / Photo: The Edge Singapore
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The two winners within this industry sector — Top Glove and Riverstone Holdings — are Malaysia-based, Singapore-listed glove makers who rode on a surge in demand for their products after the Covid-19 outbreak.

Riverstone Holdings won returns to shareholders with a CAGR of 22%. It was also named the overall sector winner.

Top Glove, meanwhile, led the pack for weighted ROE and growth in PAT, scoring 88.93% and a CAGR of 162% respectively. Riverstone was established in 1991 and listed on the mainboard of the Singapore Exchange in 2006. The company specialises in producing cleanroom and healthcare gloves, finger cots, cleanroom packaging bags and face masks. It exports more than 80% of its production to customers in Asia, the Americas and Europe, and operates five major manufacturing sites in Malaysia, Thailand and China.

In FY2021 ended December 2021, Riverstone reported revenue of RM3.08 billion ($925.9 million), up 68.5% from FY2020. Earnings in the same period increased by a more considerable quantum of 119.1% to RM1.42 billion. Riverstone attributes the increase in its top and bottom lines to higher demand for healthcare and cleanroom gloves in the first half of 2021.

While Riverstone expects demand and the average selling price (ASP) of nitrile cleanroom gloves to remain stable in 2022, it expects ASP for healthcare gloves to begin a “normalising trend” due to the demand regulating the population’s gradual adaptation to the pandemic.

The company plans to divert more resources towards the high-tech cleanroom gloves business, which is seen as a niche market with less competition, given how cleanroom gloves tend to be highly customised products requiring in-depth knowledge to develop and manufacture.

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In its FY2021 annual report, Riverstone remains optimistic about the industry’s prospects. It has an existing capacity of 10.5 billion pieces and is adding a new capacity of 1.5 billion pieces a year, bringing the total capacity to 15 billion pieces come 2024. The expansion plan will be internally financed, and the capital expenditure is expected to be around RM100 million per year as the company upgrades its equipment.

Although Wong Teek Son, the company’s executive chairman, warns of rising cost pressures and other business challenges, he has not forgotten to reward shareholders. In FY2021, the company paid out a total dividend of 48 sen per share, representing just over half its annual earnings.

Top Glove was set up in 1991 and has grown to become a significant world player in this field with a production capacity of 100 billion pieces a year, allowing it to win over a market share of 26%, selling to around 2,000 customers in 195 countries. The company was first listed in Malaysia in 2001 and then in Singapore in 2016. Under founder and executive chairman Lim Wee Chai, the company has built up a 20-year track record of growing its CAGR at 27% for its revenue and 36% for its earnings.

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While the glove-making industry has been growing over the past couple of years, industry players have all agreed that growth is normalising. “We have gone through several good and challenging cycles since we started the business 30 years ago. We are heartened that while good times do not last, neither do tough times,” says Lim in the company’s FY2021 annual report. Lim notes that business cycles are getting shorter, and the “challenge and opportunity for businesses now is to be adaptable to the rapidly changing environment.”

Lim says the softer demand and lower selling prices for gloves are “not unexpected” and Top Glove is “prepared”, thanks to reserves created during solid growth. “That being said, demand for gloves as an essential item in the healthcare sector is driven by strong market needs and this continues to grow steadily, albeit not as rapidly as during the height of the pandemic.”


Pandemic-beneficiary Medtecs International continues to lead with two wins

Medtecs International Corporation deputy chairman, executive director and CEO William Yang / Photo: Medtecs International

Malaysia-based glove maker, UG Healthcare, was named among the winners of this industry sector, picking up the weighted ROE honours with a 58.6% showing over the three years. Set up in 1989, UG Healthcare has been focusing on making and selling products under its own brand Unigloves and by setting up its distribution network, selling directly to critical customers. Besides making gloves, UG Healthcare, listed on the Singapore Exchange in December 2014, also distributes ancillary products such as other medical consumables.

Q&M Dental Group (Singapore), listed in 2009, won for growth in PAT. It reported a CAGR of 29.6% in this metric over the three years. The Singapore-based dental chain was able to tap into the demand for testing services required during Covid-19, adding a second significant earnings stream. The company operates around 100 dental outlets across Singapore, with 270 dentists and over 350 supporting staff. Outside Singapore, Q&M has 41 dental clinics. It also holds a stake in Aoxin Q&M Dental Group, which is separately listed and focuses on operating clinics and hospitals in northeast China.

The big winner of this sector is Medtecs International, one of the biggest beneficiaries of the pandemic. It made a clean sweep of all four awards last year, but it can still maintain two wins this year, despite the worst of Covid-19 being over. Besides picking up returns to shareholders with 101.8% CAGR over the three years, the Taiwan-based medical consumables maker has also been named the overall sector winner. Like the glove makers, Medtecs International enjoyed a big earnings lift amid the pandemic as demand for its products increased. With demand easing post-Covid-19, the company has indicated plans to diversify into other new businesses, including renewable energy.

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