Cordlife

Cordlife: Philip initiates at Buy with TP $0.84. Expects core earnings to increase at 8.5% CAGR over the next 3 yrs, underpinned by material improvement in market penetration in Singapore and HK, amidst a positive backdrop of accommodative policies by the Singapore govt to stimulate current low level of birthrates. The house sees potential for sustainable high dividend payout to shareholders, in line with the group’s ability to generate sustainable, strong FCF, backed by annual cashflow streams of ~$6.25m from the existing 25k existing customers on annual payment plans. Adds despite the defensive nature of the business, Cordlife trades at a fwd PE of only 15x, and FY14e FCF yield of 7%, on par with its bear case valuation level. Sees limited downside at current entry levels.