Cordlife

Cordlife: (S$1.17) FY15 missed on higher marketing costs
Cordlife FY15 results came below street expectations, as pretax operating profit of $6.1m (-32.7%) was starkly lower than consensus' estimates of $9.1m.

Revenue expanded to $57.6m (+17.3%), driven by a 33% jump in client deliveries which stemmed from increased marketing and client acquisition efforts.

However, a slip in gross margin to 69.5% (-1.5ppt) arising from a change in sales mix, and higher marketing expenses (+45.3%) due to promotional activities in India weighed on operating profits.

Bottom line grew 6.4% to $32.5m, boosted mainly by net fair value gains (+24% to $23.3m) from its investment in US-listed China Cord Blood Corp, unrealised FX gain ($4.7m), and net finance income of $2m (FY14: nil).

Final DPS of 1¢ brought FY15 total to 2¢ (FY14: 2¢), lower than Maybank-KE's expectation of 2.1¢/share.

More importantly, the key catalyst for the stock is its upcoming EGM on 14 Sep, to seek shareholders' approval on the proposed disposal of its 13.4% stake in China Cord Blood Corp to Golden Meditech.

Maybank-KE previously touted the possibility of a takeover offer for Cordlife instead, by virtue that it could present a cheaper backdoor entry into CCBC, which is in the midst of a three-way bidding war.

At the current price, Cordlife is valued at 27.7x FY16 earnings, compared to its five-year average of 22.4x.