Cordlife Group - DBS Research 2016-07-04: Penetrating regional markets

Cordlife Group - DBS Research 2016-07-04: Penetrating regional markets CORDLIFE GROUP LIMITED P8A.SI

Cordlife Group - Penetrating regional markets

  • A regional market leader in cord blood banking
  • Growth driven by regional market expansion
  • Fair value of S$1.41 based on SOTP valuation

The Business

Market leader in cord blood banking. 

  • Cordlife provides cord blood and cord lining banking services regionally. Its services include the collection, processing, testing, cryopreservation and storage of umbilical cord blood at birth. Its revenue is predominantly derived from Singapore, India and Hong Kong. 
  • Cordlife owns an 89.88% stake in KLSE-listed Stemlife Bhd.

Driving growth geographically and through new products. 

  • We see growth coming from market share gains via higher market penetration in existing markets as well as through new products. 
  • Cordlife has developed a new diagnostics product segment. This is in line with Cordlife’s vertical growth plan to improve economies of scope by offering complementary products and services catering to the mother and child segment.

Stable, recurring business. 

  • With > 50% of its banking customers on an annual instalment payment scheme, we see Cordlife as a stock that delivers stable revenue, earnings and recurring cashflows from its cord blood and cord lining banking business. 
  • A strong balance sheet (of S$0.15 net cash) and cash balances of over S$100m will provide resources for future acquisitions.

The Stock

  • Stock's fair value at S$1.41 based on SOTP. Our TP of S$1.41 for Cordlife’s stock price is backed by its cashflows, taking into account recurring nature of the instalment plans. 
  • We use DCF (t=4%, WACC=8.4%) to value Cordlife’s core business at S$1.13/share. 
  • Its 89.88% stake in Stemlife is worth S$0.13/share based on market value, while its net cash is worth S$0.15/share.

Return *: 2
Risk: Moderate
Potential Target * : 12-Month S$ 1.41

Alfie YEO DBS Vickers | Andy SIM CFA DBS Vickers | http://www.dbsvickers.com/ 2016-07-04
DBS Vickers SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 1.41 Same 1.41

*This Equity Explorer report represents a preliminary assessment of the subject company, and does not represent initiation into DBSV’s coverage universe. As such DBSV does not commit to regular updates on an ongoing basis. The rating system is distinct from stocks in our regular coverage universe and is explained further on the back page of this report.