Gaining Foothold in Malaysia and Thailand
• Intrinsic Value S$1.60
• Prev Closing Price S$1.355
Yesterday, Cordlife Group Limited (Cordlife) announced the proposed acquisition of 19.9% stake in StemLife Berhad (StemLife) at approximately RM29.6m, which will be fulfilled via the issuance of 8m Cordlife shares and RM2.85m cash. The consideration is arrived at after taking into account StemLife’s cash balances of RM76.8m as of end June 2013, freehold lands with an original book value of RM6.9m and its fundamental prospect.
We see several benefits in this acquisition. Firstly, it will enable Cordlife to expand its footprint into Malaysia and potentially Thailand. There may be an opportunity for collaboration between Cordlife and StemLife, where they can cross sell cord blood banking services in both nations and offer different tier of services. More growth will also be generated following Cordlife’s intention to extend its product offerings in the mother and child segment. Lastly, StemLife will be able to improve its gross margin as it can now ride on Cordlife for bulk purchasing and adopt more effective and advanced systems.
Most of the growth prospects will be gradually realized over the years. Hence, we are upping our terminal growth rate to 5.5% (from 5%) and assuming that StemLife will contribute S$0.5m attributable profit in FY14 and S$0.9m profit in FY15. Our model reflects a revised price of S$1.60 per share. Maintain Invest.
About the Acquiree: StemLife is Malaysia’s first and largest stem cell banking company with more than 45,000 clients. It was established in 2001 and is currently listed on the ACE Market of Bursa Malaysia. StemLife also owns 40% of Thai StemLife, the first and largest private stem cell operator in Thailand. StemLife is a founding member of Asia Pacific Cord Blood Bank Consortium and collaborates with more than 150 hospitals and 450 renowned specialists. It currently offers the storage of umbilical cord blood for babies and stem cells for adults. StemLife’s track record has been impressive with revenue rising at a CAGR of 8.5% over the last four years and PAT reversed from a loss of RM2.8m in 2009 to a profit of RM5.5m in 2012.
Publish date: 05/09/13