Cordlife

Cordlife reported 2QFY14 results which were largely in-line, as net profit tripped 25% to $4.2m despite revenue of $12.1m, taking 1HFY14 net profit to $12.9m (+53%). Gross margins fell 3.3 ppt to 68.8%. The Weaker bottom-line was partly due to a once-off $2.7m associate disposal gain in 2QFY13, offset by a $2.3m fair value gain on long-term investment this quarter, baring which profit before tax was at $2.2m (-33%). The higher revenue was led by an increase in the number of client deliveries, from ~2,300 in 2Q13 to 3,900 in 2Q14, buoyed by the group’s client deliveries from the Philippines and Indian subsidiaries and Indonesian assets which was acquired in Jun'13. Cordlife's Hong Kong subsidiary however saw a drop in revenue, due to a moratorium by the HK government on mainland Chinese mothers giving birth at private hospitals in HK starting 2013. Selling, marketing and admin expenses were up a combined 49% at $6.4m, largely contributed by the inclusion of the Philippines and Indian subsidiaries and Indonesian assets. Going forward, the group aims to derive economies of scale and expand its expand its geographical footprint into other emerging Asian markets, as well as introduce other new products catering to the mother and child segment. Overall, Cordlife’s fundamentals remain solid with the group in a net-cash position of $23m (8.6¢ per share), and at current price the group trades at an annualized ex-cash 17.1x FY14E P/E. Cordlife has declared an interim dividend of 1¢ per share.