Excerpts from report by NUS Investment Club
Analysts: Xu Meng, Teai Juin Wen, and Raffles Ng
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Abundant possibilities of revenue growth: Cordlife’s growth potential is not limited in existing markets. The number of newborn babies (India, Indonesia and Philippines amounting to 25.2 million increase in population yearly) is set to grow.
With current product penetration rates woefully low at 1.1%, 0.3% and 0.11% for India, Indonesia and the Philippines respectively, there is potentially a vast horizon for expansion. Furthermore, increased finances allocated to marketing (63% increase from 2013 to 2014) Cordlife’s products signify the Group’s dedication to market positioning. We project Cordlife’s revenue to grow at CAGR of 21.9%.
In CCBC we trust: Cordlife’s plummeting stock price after the purchase of CCBC convertible bonds worth US$44m and US$46.5m loans to Magnum Opus indicates that investors underestimate the return and overestimate the risk of the deal.
Jeremy Yee, CEO of Cordlife. File photo.Besides lucrative interest return of US$3.5m, investment in CCBC also strengthens Cordlife’s access to the expanding high-barrier-to-entry China market where each region of the PRC only permits one licensed cord blood banking operator.
Moreover, CCBC’s well-established sales platform facilitates the promotion and sales of Cordlife’s core products such as cord tissue storage and newborn screening services.
Through the investment in CCBC, Cordlife rides upon the growing private blood banking market in China. We expect the stock price to recover after investors see the upside potential of Cordlife’s collaboration with CCBC.
Cementing a leadership position and building a brand empire: Cordlife is the market leader in Singapore, Indonesia, and the Philippines, 3rd in India as well as 2nd largest private cord blood operator in Hong Kong.
Accredited with numerous service excellence awards, collaborating with Duke Medicine Research for potential medical advancements and launching high quality diagnostic services, Cordlife will able to take advantage of its leadership position and benefit from the economy of scope and increase average revenue generated per customer by complimenting their services (60% of customers opt for cord lining tissue banking alongside cord blood banking).
This strategy is transforming Cordlife from a cord blood banking company into a full medical service provider for the mother and child segment.
Full report here.
