Cordlife

Cordlife: 3QFY15 result in line, with net profit advancing more than 12x to $18.4m, largely buoyed by fair value and FX gains, barring which, pre-tax profit was at $2.2m (-7%).

Revenue for the quarter was up 20.9% to $14.3m, mainly due to an increase in the number of client deliveries to 5,400 from 4,100 in the previous year, as a result of increased marketing and client acquisition efforts.

Gross margin fell to 68.6% from 74% due to an increase in revenue contribution from operations with lower margins. Meanwhile, admin expenses rose 5.8% to $3.5m, while selling and marketing expenses advanced 36% to $4.4m.

Bottom-line was aided by fair value gains from financial assets of $7.6m and derivatives of $3.7m, alongside FX gains of $4.6m.

Going forward, Cordlife remains positive on its outlook, as it latches on the growth of emerging Asian nations by expanding its geographical footprint for cord blood and umbilical cord lining banking business and other newly introduced products catering to the mother and child segment.

Maybank-KE believes that 4QFY15 should also feature stronger seasonality and initial revenue
recognition of earlier Indian sign-ups, and the house expects core EPS to catch up with its full-year forecast.

Separately, the group has also accepted Golden Meditech’s (GM) offer to buy its China Cord Blood Corporation (CCBC) shares and convertible notes for US$6.40/share and US$7.00/note, where upon completion, Cordlife will receive net proceeds of $90m, which could be used to pare debt, expand and pay a special dividend.

At the current price, Cordlife trades at 35x forward P/E. Maybank-KE maintains Buy with TP $1.56