Cordlife Group

Kim Eng on 13 Feb 2014

1HFY6/14 in line
Cordlife’s 2QFY6/14 revenue grew 31% YoY to SGD12.1m while reported earnings fell 25% YoY to SGD4.2m. Stripping out exceptional items, core earnings of SGD2.1m were in line at 21% of  our full-year forecast (1Q: 19%). 1H core earnings accounted for 40% of our full-year forecast, in line with historical trends, and fell 13% YoY to SGD3.9m due to the temporary disruptions to businesses
at its newly-acquired entity in Indonesia and in the Philippines.

Stronger 2H expected
The second half of the financial year is traditionally stronger for Cordlife, and we expect the same this year (until June), aided by 2014 being the Year of the Horse, the second best Chinese zodiac to have babies. Catalysts: (1) a sustained turnaround for its Hong Kong operations (helped by restructuring and market share gain), and (2) more contributions from new products – cord tissue storage in Singapore (Aug 2013), cord tissue in the Philippines, Indonesia, Malaysia and China, and Metascreen in Hong Kong and Singapore.

Maintain BUY
We expect stronger growth as Cordlife moves past digesting its newly-acquired entities and launches new products across its expanded platform in Asia. We roll over our valuation base year to FY6/15E and switch our valuation methodology from P/E to SOTP to factor in (1) the reclassification of CCBC from associate to investment and (2) higher net cash (SGD40m) following a placement in Oct 2013, thus arriving at a TP of SGD1.42