CORDLIFE GROUP LIMITED
P8A.SI
Cordlife Group (CLGL SP) - In Transition
Missed on Expansion Costs & Soft Topline
- 2Q6/16 earnings missed due to high marketing and admin costs, as Cordlife undertakes several corporate exercises and expanded in the Philippines and Indonesia.
- 1H16 EPS made up 25% of our FY16F; we were going for c.40%.
- Also, topline growth was softer, due to disruptions in Singapore from a new product rollout and shift in its marketing campaign from India to the Philippines and Indonesia.
- Increased contributions from the lower-margin developing markets have also dragged down gross margin by 1.1ppt YoY in 2Q6/16.
- We cut FY16-18E EPS by 7-15% for these, which lowers our SOTP-based TP.
- Still, HOLD for corporate-development prospects.
- We have also yet to factor in its new markets and products. These include expansion into China and new products such as children eye testing and non-invasive pre-natal testing.
War Chest for Expansion After disposing of its stake in China
- Cord Blood Corp (CCBC) in Nov 2015 and paying a special dividend of SGD36m in 2Q6/16, Cordlife still had net cash of SGD76m. This provides headroom for M&As to expand its reach and products.
- In Feb 2016, Cordlife invested SGD8.4m in CellResearch Corporation, a Singapore-based global leader in cord lining stem cells for stem cell regenerative medicine and therapy, with patents in over 39 countries.
- We believe CellResearch can enhance its offerings and provide a solid partnership for its expansion into China.
Maintain HOLD; Positives Priced In
- We roll over to FY6/17 in our SOTP valuation and adjust cash balances for its special dividend.
- Our SOTP TP dips to SGD1.59 from SGD1.72. This already incorporates potential shareholding changes that could alter management control at Cordlife from corporate developments.
John Cheong CFA
Maybank Kim Eng
|
Gregory Yap
Maybank Kim Eng
|
http://www.maybank-ke.com.sg/
2016-02-16
Maybank Kim Eng
SGX Stock
Analyst Report
1.59
Down
1.72
