Cordlife

Cordlife: (S$0.865) Clear growth strategy and strong competitive advantage Cordlife was one of nine small/mid-cap companies that Maybank-KE showcased at its Corporate Day event. The house likes Cordlife for its strong growth prospects, underpinned by increased penetration in India (from a low base), new product roll outs, and potential maiden dividend from its investment in US-listed China Cord Blood Corp (CCBC). In India, new sign-ups jumped 3x in 1Q6/15 after promotional efforts. Revenue will be recognized in six to nine months, when clients deliver their babies. Expansion is underway in other population-growth countries such as Indonesia and Philippines. Leveraging on its established distribution network across the region, the company is planning to roll out new and complementary products catering to the mother and child segment. One such product is MetaScreen, which provides storage for umbilical cord tissue. While clients expressed concern that CCBC is hoarding a cash pile of US$351m against its market cap of just US$343m, Cordlife management hinted at potential payment of dividends in the future. Still, overall sentiment amongst clients was positive. The company is liked for its clear growth strategy and strong competitive advantages (being good track record, highly recognized accreditation, regional coverage and ability to command premium prices). Maybank-KE reiterates Buy with a conservative TP of $1.30, valuing the core business at $0.84 or 25x FY6/15e P/E, at the lower end of the peer average range of 23-34x. Cordlife’s stake in CCBC is valued at $0.46, the lowest TP for CCBC (US$6) adjusted for exchange rate (USD/SGD = 1.25).