Cordlife

Cordlife: (S$1.17) Attractive takeover target
In the thick of a potential bidding war for Cordlife's 9.1%-owned US-listed China Cord Blood Corp (CCBC), Cordlife's pivotal stake as its third largest shareholder entrenches the group in a favourable position.

The privatisation offer first came from CCBC's majority shareholder Golden Meditech (GM) in late-Apr, followed by cries of rejection from the second largest shareholder private equity firm Jayhawk Capital on the extremely low privatization offer.

The development has now expanded into a three-way rumble with three contenders comprising GM, rival Zhongyuan Union Cell & Gene Engineering, and Shanghai-listed Nanjing Xinjiekou Deparment Store.

Potential scenarios that would emerge from the contest are:
1) A higher bid of at least 25% above the initial offer from GM;
2) A general offer for the whole of Cordlife.

While the second option may sound a little far-fetched, Maybank-KE believes there may be a small potential given Cordlife's attractive valuations.

The house touts an offer of at least $1.62 to $2.09 per share for Cordlife, which has to be tabled before Cordlife's EGM on CCBC's privatisation offer.

At the current price, Cordlife trades at an undervalued 18x ex-cash P/E, supported by an additional $150m cash derived from its CCBC stake sale to GM, constituting more than 40% of its market cap.