Excerpts from analysts' reports
OSK-DMG lifts target price of Cordlife to $1.55 from $1.50
Analysts: Arshath Mohamed & Shekhar Jaiswal
Cordlife CEO Jeremy Yee speaking with shareholders at last year's AGM. NextInsight file photo
Cordlife reported FY14 results that were in line, with revenue growth aided by its recent expansion into India, Indonesia and the Philippines. We expect increased penetration in these markets to continue driving net profit going forward. While the recently-announced impending purchase of CCBC’s convertible notes is positive for long-term growth, it comes with some risks. We raise FY15F/FY16F EPS by 12%/10% and lift our TP to SGD1.55 (vs SGD1.50). Maintain BUY.
Numbers still on track. Cordlife reported FY14 results that were in line, with a 41.5% y-o-y increase in revenue to SGD49m. Revenue growth was aided by its recent expansion into India, Indonesia and the Philippines – which helped to boost the number of client deliveries to 15,880 in FY14 from 7,700 in FY13. Its recurring profit was SGD6.4m and accounted for 104% of our estimates.
Strong growth drivers. The low industry penetration rate in India, Indonesia and Philippines should translate into higher client deliveries and drive revenue growth. Margins should improve as well, boosted by:
i) the lack of one-off costs related to entering into new markets, and ii) rising royalty income from Stemlife (STEM MK, NR) and China Cord Blood Corporation (CCBC).
Purchasing convertible notes. Cordlife will buy USD25m of CCBC's (CO US, NR) 7% convertible notes from Golden Meditech (801 HK, NR) for USD44m. It is also arranging a USD46.5m facility for Magnum Opus, which is controlled by Mr Yuen Kam, chairman of CCBC, to enable him to buy another USD25m of the notes. Cordlife will fund the notes purchase and facility for Magnum through raising debt. Its stake in CCBC will increase to 18% from 10% on conversion of the notes, while the funds arranged for Magnum should result in higher interest income as the lending rate of 7%, we believe, would be higher than borrowing costs.
Benefits and caveats.
In addition to financial gains from the above deal, Cordlife’s increased stake in CCBC will boost revenue as it would be able to push new products in China. While we view this positively, we note that it comes with significant risks.Recent story: CORDLIFE ups stake in CCBC; OTTO secures A$57m charter contracts
Voyage Research pegs CNMC Goldmine's intrinsic value at 84 cents
Analyst: Liu Jinshu
Chris Lim (standing), CEO of CNMC, with Peter Choo (seated), vice-chairman of CNMC. NextInsight file photo.CNMC Goldmine Holdings Ltd reported a 254% increase in net profit after tax on revenue growth of 62% for 2QFY2014, compared with 1QFY2014.
The 1H results were largely in line with our expectations. In particular, profit after tax amounted to US$7.05 million ($8.81 million), of which cash generated from operations was US$6.39 million.
Essentially, CNMC's production and profitability can be said to be "out of the woods" and no longer at risk of lapsing into periodic losses, as was the case during its first year of operations post-listing.
To reward shareholders, the company has further raised its interim dividend to 0.15 cents a share (1% annual yield), compared with 0.1 cent previously.
1HFY2014 net margin came in at 42.6% versus our estimate of 34.4%.
We maintain our forecasts and valuation in this report. Intrinsic value of 84 cents.
Recent story: CNMC GOLDMINE: US$5.5m profit in 2Q, Strong cash flow, low production cost