Cordlife Group

Kim Eng on 4 Apr 2012

Background: Cordlife Group Limited is one of the first private cord blood banks in Asia. It has a 62% market
share in private cord blood banking in Singapore and a 28% market share in Hong Kong. The company also
provides umbilical cord tissue banking services in Hong Kong.

Recent developments: The stock closed at 37% above its IPO price of $0.495 on the first day of trading on 29 March 2012 and is now 48% above its IPO price. Of the net proceeds of $26.3m raised, Cordlife plans to use $16.6m to develop and expand its business operations in Singapore and overseas, $3.0m to renovate its new headquarters in Yishun, $2.0m for IT infrastructure investments, and the remaining for working capital purposes.


Businesses in developed stage. Cordlife was carved out from Australia-listed Cordlife Limited (CBB) and came with the Singapore and Hong Kong businesses which are already in the developed stage. It also owns a 10% indirect stake in the sole cord blood banking operator in China’s Guangdong province. This is a protected industry in China and Cordlife is the only foreign entity to have an interest in a China cord blood company.

Potential to acquire developing businesses. Cordlife also has the right of first refusal to acquire CBB’s cord blood banking businesses in Indonesia, the Philippines and India, which are currently in the developing stages. The India market may take up to five years to develop while Indonesia and the Philippines could take about three years.

Recurring cash flow. The cord blood business is essentially stable and recurring in nature. Cordlife’s 20,000-strong customer base currently generates a stable annual cash flow of about $5m. Growth expectations. According to a market report by Deloitte & Touche Financial Advisory Services, the cord blood storage market is expected to grow at 9-10% CAGR for Singapore and Hong Kong and 22% pa for China over 2010-15.

Share price surge makes valuation expensive. While this is a good business with high entry barriers, valuation is hard to determine as most comparable companies are illiquid. China Cord Blood and Cryosite, are trading at about 10-11x PER. Cordlife currently trades at 20x FY11 PER following the surge in its share price. We believe that share price may start to retreat after the initial euphoria.