Highlights

• Riverstone reported a strong set of earnings for 2Q26 that was 40% above our expectations, where earnings of RM66m grew 45% yoy and 60% qoq.
   
• We expect the cleanroom segment to continue benefitting from AI-driven demand from the data centre and memory storage sectors.
   
• Maintain BUY with a 9% higher target price of S$1.21, pegged to 24x 2027F PE. Riverstone currently trades at around 30% discount to peers.

Analysis

• 2Q26 earnings significantly ahead of expectations. Riverstone Holdings (Riverstone) reported a strong 2Q26, with PATMI of RM65.8m (+45.0% yoy,
  +60.2% qoq) coming in around 40% above our expectation. Revenue rose 8.9% yoy and 24.5% qoq to RM266.7m, driven by stronger cleanroom demand, while improved healthcare pricing supported margin recovery. This brought 1H26 revenue to RM480.9m (-3.2% yoy) and PATMI to RM106.9m (+5.0% yoy), representing 49% and 59% of our previous 2026 forecasts respectively. 
   
• Cleanroom: AI-related demand drove sequential recovery. 2Q26 revenue rose to RM266.7m (+24.5% qoq), driven by stronger cleanroom glove demand. Management highlighted continued demand from AI-related data centre and memory-storage applications, reinforcing cleanroom’s position as Riverstone’s key earnings driver. The group is also renewing ageing production lines and shifting away from low margin generic output towards higher-value cleanroom and customised healthcare products, which should support product mix and margins over time.

• Cash position remained robust; 5 sen interim dividend declared. Riverstone ended 1H26 with RM576.0m in cash and cash equivalents, down
  from RM630.4m at end-25 mainly due to dividend payments. The group still generated RM102.4m in operating cash flow during 1H26, while capex remained modest at RM12.0m. An interim dividend of 5.0 sen per share was declared, translating to a 69.3% payout ratio.