- 3QFY6/14 results disappointed due to softness in Singapore and Hong Kong, while operations in the Philippines, India and Indonesia delivered promising results.
- FY6/15E is set to be a strong year as positive catalysts converge, helped by new product rollouts, Singapore’s Golden Jubilee Year and stronger contributions from China.
- Reiterate BUY with TP of SGD1.43, based on SOTP.
Cordlife posted weaker-than-expected 3QFY6/14 results due to softness in Singapore and Hong Kong. This was somewhat compensated by strong performance in the Philippines, India and Indonesia (collectively account for 30-35% of revenue). Singapore’s revenue increased at an unexciting pace of 5-6% YoY in 3QFY6/14 due to slower birth rate. While Hong Kong continued to be affected by maternity ban on mainland Chinese women since Jan 2013, the operation has broken even during the quarter.
Positives abound; eyeing a strong FY6/15E
There are various positives awaiting Cordlife in FY6/15E. First, new products (Metascreen, umbilical cord tissue storage) will be rolled out across the region at a time when its growth markets are gaining critical mass. Second, we expect birth rate in Singapore to rise next year in conjunction with the Golden Jubilee celebrations. Lastly, we expect maiden royalty income from CCBC as Cordlife and CCBC ramp up cord tissue storage services in China. A similar agreement has also been inked in Malaysia.
Earnings trimmed; outlook remains positive
We cut our FY6/14E forecasts by 7% to factor in weakness for its home market. While we leave our forecast for FY6/15E largely unchanged, we reduce that for FY6/16E by 6%. Notwithstanding, we maintain BUY on Cordlife given its strong earnings profile.
No comments:
Post a Comment