Excerpts from analysts' report

Maybank Kim Eng analysts: John Cheong & Gregory Yap

Cordlife SG baby
Have Cash Will Grow
 

» 1Q16 missed on lower revenue growth and higher marketing expenses outside India. Cut FY16-18 EPS by 19-24%. 

» Special DPS of SGD0.13 declared. Balance of SGD62m to fund accelerated market expansion and new products. 

» BUY, SOTP TP of SGD1.53. Raise valuation target from 28x to 35x for stronger leverage from cashed-up balance sheet. 


What’s New
1Q16 missed at 14% of FY06/16E. 10% revenue growth tracked below our 17% full-year growth forecast due to lower pricing in India vs Singapore despite strong volume growth. Some Singapore deliveries also slipped into 2Q. Part of this could be due to timing issues.

The main variance came from higher marketing costs that fell in India, but rose in Philippines and Indonesia as Cordlife raised A&P there to boost signups. We lower FY16-18 EPS mainly for this. On the bright side, it declared a SGD0.13 special DPS (c.40% of its CCBC sale proceeds).


What’s Our View?
With a reinforced cash pile of almost SGD100m (SGD62m from CCBC sale after paying the special dividend on top of the SGD30 cash projected for FY16E), Cordlife can now speed up its expansion plans.

johncheong maybank9.14"The China baby market is expected to boom with the recent relaxation of the one-child policy. Mother and Baby products were among the top-5 best-selling products in Alibaba’s Singles Day sale. We have yet to factor growth potential from these initiatives into our forecasts." -- John Cheong (photo) & Gregory Yap

These include new products such as children eye testing and non-invasive pre-natal testing that it could channel into its current database of >100k cord blood storage customers. It can also embark on more JV and M&A activities to fuel growth. Expect more catalysts from such future initiatives in coming months.

For the all-important China market, selling its CCBC stake is not the end. We expect its China strategy to be made known in coming months. It is likely to introduce cord tissue storage and metabolic screening services, perhaps with a JV partner who can help it quickly penetrate the market.

Full report here.


Comments  

0 #2 sharestar 2015-11-18 13:17
look at it another way , when u build hotel , do u restrict your customers only to pregnant ladies ?

TalkMed dont restrict .

Who have the better business ?
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0 #1 sharestar 2015-11-17 14:55
talkmed another singapore listed medical company also offer cord blood storage. And in addition recently offer storage for adults stem cells from the fat tissue. which open the door to the business for the rest of the population ( the majority BTW ! ) who dont store cord blood.

Why would cordlife not offer what their competitions offer , for practically no additional investments really make no financial sense.

Everytime I hear them say they only want to do cord blood for mothers and child make me sad for investors as it is hard to do business for a rare life event. ( especially in Singapore ).
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