Cordlife

Cordlife: UOB Kay Hian downgrades to Hold and slash TP to $0.53 from $0.66 and recommend entry price of $0.42 for 25% upside. House note that 9M12 rev +14.2% yoy to $21.3m, equivalent to 66.8% of house full-year forecast. The increase in rev was mainly due to an increase in the provision of cord blood banking services of about $1.9m driven by an increase in the number of client deliveries from about 4,900 in 9MFY11 to about 5,300 in 9M12 and rev of $0.7m from the newly-started cord tissue banking services. Gross margin decreased from 70.9% in 9MFY11 to 68.8% in 9MFY12, due to the increased cost of testing required due to a change in regulatory standards. Overall, house note that 3Q12 rev grew by 13.2% yoy, below forecast of 24.1% yoy. House had anticipated much stronger sales as: a) FY12 revenue was expected to rebound strongly from a low base in FY11, which was caused by a deterioration of the global economic condition, b) 2012 falls in the Year of the Dragon and had forecasted a higher number of births, and c) Cordlife was expected to recognise first time revenue contribution from the tissue banking service. Technically, stock has been on a downtrend since its listing. Support is at $0.45 while resistance is at $0.55.