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Cordlife Group
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www.jpmorganmarkets.com
Asia Pacific Equity Research
01 August 2013
Company Visit Note
Cordlife Group Limited
Healthcare Services
Ying-Jian Chan, CFA AC
(65) 6882-2378
Bloomberg JPMA YCHAN
J.P. Morgan Securities Singapore Private
Limited
See page 14 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
We visited Cordlife Group Limited at their new facility, APosh Bizhub in
Yishun, where the management shared with us the companys current
operations and growth plans.
Key highlights from the meeting:
Market leader position in Singapore: Cordlife is the market leader for
private cord blood banking in Singapore with a 62% market share in 2011.
Management estimates that this figure may have since increased to more
than 70%. Competitive advantages include the AABB accreditation and a
track record of 10 successful cord blood transplants.
Expansion of services and geography: Cordlife pursues a dual strategy of
growth, through expansion of services and ventures into new geographies. It
recently added umbilical cord tissue banking within Singapore, and has
indicated plans to further add to their product mix. At end of June 2013, the
company acquired businesses and assets in Philippines, Indonesia and India.
Reaping economies of scale with Asias largest private cord blood
storage facility: Cordlife launched its new 23,000 square feet facility in
April 2013. Management believes that the move will enable the company to
further meet the needs of its growing customer base in Singapore and allow
it to benefit from economies of scale, leading to greater operational
efficiency and margin expansion for their Singapore operations.
Stable recurring cash flow + dividend yield support: Cordlifes payment
plans include a combination of lump sum payments and recurring annual
installments. With 25,000 customers on the installment plan, and a growing
subscriber base, Cordlife expects a stable and recurring cash flow.
Management has also indicated a commitment to dividends.
Valuation: The stock now trades at a FY13E consensus P/E of 23.4x, and
has outperformed the STI Index by 97% since its IPO on 29 March 2012.
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT
AS A RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL
INFORMATION OBTAINED BY THE ANALYST DURING MEETINGS WITH
THE MANAGEMENT. J.P. MORGAN DOES NOT COVER THIS COMPANY AND
HAS NO RATING ON THE STOCK.
Cordlife Group (Bloomberg CLGL SP; Reuters: CORD.SI)
SGD in millions, year-end Jun FY10 FY11 FY12
Revenue 28.2 25.7 28.8 Shares O/S (mn) 232
Net profit (reported) 8.3 8.5 6.9 Market cap (S$ mn) 245
Net profit (recurring) 8.3 8.5 8.8 Market cap ($ mn) 193
EPS 0.04 0.04 0.03 Price (S$) 1.06
Recurring EPS (SGD) 0.04 0.04 0.04 Date of price 1-Aug-13
Recurring EPS growth 34% 2% 4% Free float (%) 65.9%
DPS (SGD) 0.0 0 0.00 0.04 3mth Avg daily volume S$ mn) NA
Sales growth 24.7% -8.8% 12.1% Average 3m Daily Turnover ($ mn) NA
ROE 25% 21% 9.7% FTSTI 3,243
P/E (recurring) (x) 29.7 28.9 27.8 Exchange rate 1.27
P/B (x) 7.4 6.0 3.4 Year-end Jun
Dividend yield 0.0% 0.0% 3.6%
Source: Company data.
CLGL SP, Not Covered
S$1.06, Aug 1, 2013
Share price
S$
Source: Bloomberg.
YTD 1m 3m 12m
Abs 88% 4% 48% 122%
Rel 86% 1% 55% 109%
Source: Bloomberg.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Mar-12 Aug-12 Jan-13 Jun-13
2Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Key highlights from the meeting
We visited Cordlife Group Limited at their new facility at APosh Bizhub in Yishun,
where the management shared with us the companys current operations and growth
plans.
Market leader position in Singapore
Cordlife is the market leader for private cord blood banking in Singapore with a 62%
market share in 2011. Management estimates that this figure has since increased to
more than 70%. Management see certain competitive advantages which helps
Cordlife defend this position:
1. AABB accreditation: According to management, the process of accreditation
may take up to 2 years. The accreditation is important as it allows patients to
easily use the blood for transplant in many countries. This accreditation process
therefore creates a certain degree of barrier to entry for new entrants.
2. Cordlifes strong track record: According to management, Cordlife has
recorded 10 successful cord blood transplants. This track record provides
reassurance to customers who are deciding on a blood bank. Based on available
public disclosure, there has not been any successful transplant in the other
Singapore private cord blood banks yet.
3. Secured facility at APosh Bizhub: Cordlifes new facility is equipped with
backup systems such as an electricity generator, mobile storage, and liquid
nitrogen tanks. The facility itself is also designed to insulate against fire
breakouts. This increases assurance for subscribers.
4. Cordlife Care 360 Safeguard: This plan was designed to increase subscribers
peace of mind. Its coverage includes pregnancy and childbirth complications, as
well as a guarantee match for a cord blood unit (or US$25,000 to defray medical
costs if the cord blood unit loses viability at point of transplant).
Expansion of services and geography
Cordlife pursues a dual strategy of growth through expansion of services and
ventures into new geographies.
Expansion of services
It recently added umbilical cord tissue banking within Singapore through a
partnership with Thomson Medical Pte Ltd in May 2013. However, this service is
still under clinical trial, and is currently not yet licensed by the Ministry of Health
(MOH). Cordlife has also indicated plans to further add to their product mix; these
planned incremental services will leverage on Cordlifes existing expertise and
distribution channels, which allows them to roll out more easily and economically.
Expansion of geography
At end of June 2013, the company announced acquisitions of cord blood and cord
tissue banking businesses in Philippines, Indonesia and India from Australian listed
Life Corporation Limited (formerly Cordlife Limited), which the Cordlife Group had
demerged from. Cordlife had a right of first refusal on these assets and previously
indicated intentions to acquire these assets once they started to turn profitable. Total
consideration for the acquisitions was A$5.5million.
3Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
According to management, gross margin for these countries are at 55-65% (vs.
Singapore: c.70%). On a net profit basis, management has indicated that operations
in Philippines, Indonesia and India have just started to break even. In July 2013,
Cordlifes India subsidiary was also awarded the AABB accreditation
Reaping economies of scale with Asias largest private cord
blood storage facility
In April 2013, Cordlife launched its new 23,000 square feet facility, which spans 18
strata units on levels 5 and 6 of APosh Bizhub in Yishun. Management believes that
this move will enable the company to further meet the needs of its growing customer
base in Singapore and allow it to benefit from economies of scale. This facility is
also the first one in Asia to adopt an improved automated stem cell processing
technology known as Sepax 2, which allows for greater extraction effectiveness in
harvesting red blood cells from cord blood.
The motivation behind the outright purchase of this facility is to lock in property
costs and ensure that the business remains scalable as the companys customer base
expands in Singapore. Currently, while the facility is able to house up to 650,000
cord blood units, only approximately 40,000 cord blood units are being stored there.
Therefore, Cordlife leases out its units on level 5 to generate rental income in the
meantime.
As operations scale up, management is of the view that fixed costs of running the
facility will be spread out across a larger customer base, leading to greater
operational efficiency and margin expansion for their Singapore operations.
Stable recurring cash flow and dividends indication
Stable cash flow generation
Cordlifes payment plans include options for lump sum payments and/or recurring
annual installments. Of the current c.48,000 customer base, about 25,000 are on
installment plans. With a growing subscriber base, Cordlife expects a stable and
recurring cash flow. Since IPO, the company has been free cash flow positive.
Figure 1: Steady growth in client base
Source: Company reports.
0
10000
20000
30000
40000
50000
FY10 FY11 FY12
Existing client base Incremental clients
40,000
32,800
26,200
4Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Figure 2: Cordlife's business model generates stable, recurring cash flow
Source: Company reports.
Dividend indication at least 25% payout ratio
Management highlighted that the company intends to recommend and distribute
dividends of at least 25% of FY11 and FY12 net profit for FY12 and FY13. The
stable cash flow generation should support this commitment. In FY12, Cordlife
declared S$8.8 million in dividends or S$0.038/share, which translated to 128%
payout ratio. This is inclusive of a S$0.018/share special dividend. We note that the
payout in FY12 was higher than free cash flow generation for that year, and was
probably supported by cash flow from FY11 where no dividends was paid out.
Table 1: Cordlife dividend payouts
S$ million
FY11 FY12
Dividend 0.0 8.8
Net income 8.5 6.9
Payout ratio 0% 128%
FCF 5.0 3.7
Dividend/FCF 0% 241%
Source: Bloomberg, Company reports, J.P. Morgan.
Industry growth prospects
The private cord blood banking industry which Cordlife currently operates in is
characterized by high penetration rates for developed markets (Hong Kong,
Singapore, China) and low but rising penetration rate for developing markets (India,
Philippines, Indonesia). It is driven largely by 4 demand factors: birth rates, rising
affluence, increased acceptance and awareness, and government policy support.
In Cordlife's key markets of Singapore and Hong Kong, while birth rates are
expected to stay relatively low, growth will be driven by increasing penetration rates.
On the other hand, in markets such as Philippines, Indonesia and India, growth is
expected to be driven both by the larger number of births (higher birth rates and
larger population base), and the increasing penetration rates which is forecasted to
approximately double by 2015.
5Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Figure 3: Penetration rates for developing markets
Source: Deloitte & Touche Financial Advisory Services Limited report, Company reports.
Figure 4: Penetration rates for developed markets
Source: Deloitte & Touche Financial Advisory Services Limited report, Company reports.
*China figures are for provinces with cord blood banking operations.
Table 2: Growth drivers for Cordlife's markets
Demand driver Singapore Hong Kong China India Philippines Indonesia
Public
awareness/acceptance
Most pregnant
women informed
at hospitals
Marketing efforts
to educate
doctors and
consumers
Awareness has
been raised
through celebrity
advertisements,
marketing to
doctors, and
encouraging
referrals
Rising awareness
of doctors and
parents led by
improved
education and
urbanisation
Rising awareness
led by intensive
marketing efforts,
as well as
increased access
to information
through the
internet
Both government
and private cord
blood banks are
promoting cord
blood banking to
the general public
Rising awareness
due to promotion
activities by cord
blood banks
Birth rates Pro-family
policies to boost
birth rates, e.g.
$2 billion
Marriage &
Parenthood
Package 2013
Projected
increase of birth
rate from 0.74%
(2011) to 0.76%
(2015)
Increased
duration of free
education to
encourage
having children
Second most
births annually in
the world
Annual new
births of 25.7
million expected
by 2016
India predicted to
become most
populous nation
by 2025
Population
expected to
increase by 8
million from 2011
- 2015
Large population
base, with annual
new births
expected at 4
million
Government policy /
structural support
Cord blood
banking can be
paid through
CDA
Hong Kong
citizens have
subsidised health
care, inclusive of
cord blood
transplant
operations
Stem cell industry
is covered under
China's 12th 5-
year plan
- Relatively well
developed
healthcare
system, with 86%
of citizens
enrolled in
PhilHealth. Some
packages cover
stem cell related
transplants
-
Affluence and
expenditure
Ratio of private
household
expenditure on
health care has
been increasing
(3.5% in 1998 to
5.3% in 2008)
- Rising middle
class leading to
bigger pool of
potential
customers
Rising middle
class
Rising middle
class: expected
per capita
disposable
income to
increase by
157% from 2007
- 2015
Per capita
disposable
income expected
to increase 98%
from 2007 - 2015
Source: Company reports, Deloitte & Touche Financial Advisory Services Limited report (10 April 2013), J.P. Morgan.
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
2007 2011 2015F
India Philippines Indonesia
0%
5%
10%
15%
20%
25%
30%
2007 2011 2015F
Singapore Hong Kong China
6Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Table 3: Cordlife peer valuation comparison
Last Price Market Cap P/E (x) 2-yr EPS CAGR P/B (x) ROE (%) Div yield (%)
Company Ticker (S$) (S$MM) FY13E FY14E FY12-14E FY13E FY13E FY13E
Cordlife Group CLGL SP 1.06 245 23.4 20.7 12% 3.1 15.5 2.0
Biosensors International BIG SP 1.03 1,772 11.9 10.5 7% 1.0 9.1 0.9
IHH Healthcare Berhad IHH SP 1.57 12,770 47.1 38.5 -5% 1.8 4.0 0.4
Raffles Medical Group RFMD SP 3.28 1,815 29.0 24.5 13% 4.2 15.4 1.4
SG Healthcare Stock average 27.9 23.5 7% 2.5 11.0 1.2
Source: Bloomberg consensus estimates. Prices as of 1 August 2013 market close.
7Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Company background
Cordlife Group Limited was listed on the Singapore Exchange on 29 March 2012,
raising S$26.3 million net of IPO expenses for the purpose of business expansion,
renovation works on its new headquarters and financing working capital. As of 31
July 2013, 49% of IPO proceeds have been utilized.
Table 4: Update on the use of IPO proceeds
Intended use of IPO proceeds Use of IPO proceeds as of 31 July 2013
Estimated amount
(S$ millions)
Estimated percentage of gross
proceeds raised from the IPO
Amount utilized
(S$ millions)
Percentage of gross proceeds
raised from the IPO
Development and expansion of business and
operations in Singapore and overseas
(includes June 2013 acquisition of Philippines,
India and Indonesia assets)
16.6 55.9% 9.8 33.2%
Renovation of proposed new headquarters and
facility at Yishun, A'Posh Bizhub3 10.1% 1 3.4%
Investments in infrastructure relating to
information technology2 6.7% 0 0.0%
Working capital and general corporate
purposes4.7 15.8% 0 0.0%
Expenses incurred in connection with the IPO 3.4 11.5% 3.7 12.5%
Total 29.7 100% 14.5 49.0%
Source: Company data.
The company has experienced rapid growth over the past year and now has a market
capitalization of c.S$250 million.
Growing footprint across Asia
Cordlife Group was incorporated in May 2001 and is currently the larger of the two
private cord blood banking service providers in Singapore and second largest in
Hong Kong, with over 70% in market share in Singapore based on management
estimates.
Cordlife Hong Kong, along with the 10% stake it held in Guangzhou Tianhe Nuoya,
a Cord Blood Banking operator in Guangzhou, was transferred into the Group in
2010. In November 2012, Cordlife Group divested the 10% stake in Guangzhou
Tianhe Nuoya to China Cord Blood Corporation (CCBC) as partial consideration for
a 10% stake in CCBC, which is listed on the NYSE. In June 2013, it acquired cord
blood and tissue banking assets in India, the Philippines and Indonesia from
Australian listed Life Corporation Limited (formerly Cordlife Limited), which the
Cordlife group had demerged from previously.
The group now has a customer base of approximately 48,000, of which a majority
(c.40,000) is from its more matured Singapore operations. With the exception of
China, Cordlife ranks top 3 in all other markets that it has a presence in. A
breakdown of the largest 3 players in Cordlifes market segments are as follows:
8Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Table 5: Market position in key markets
Singapore Hong Kong Mainland China India Philippines Indonesia
Top 1 Cordlife HealthBaby CCBC* Lifecell Cordlife Cordlife
Top 2 Stemcord Cordlife Zhongyuan CryoBanks StemCord BabyBanks
Top 3 - Cryolife Shandong Cordlife Medical City StemCord
Total no. of companies 2 6 8 11 5 5
Source: Deloitte & Touche Financial Advisory Services Limited report (10 April 2013).
*Cordlife has 10% share in China Cord Blood Corporation (CCBC).
Product mix
2 product types cord blood banking, and cord tissue banking
Cordlife Group currently offers 2 products, cord blood banking and umbilical cord
tissue banking services. The purpose of these services is to harvest stem cells from
cord blood and umbilical cord tissue and store them for future use.
Haematopoietic stem cells are harvested from cord blood and is effective in treating
blood disorders and certain cancers such as Leukaemia, Lymphoma and
Thalassaemia. Meanwhile, Epithelial and Mesenchymal stem cells are harvested
from umbilical cord tissue and can be used to grow tissues and organs such as bone,
cartilage, the liver, cornea or skin. With ongoing advances in medical research, there
is potential in unlocking new treatments using stem cell technology.
Figure 5: Uses of Epithelial and Mesenchymal stem cells
Source: Company reports.
Rationale for private cord blood banking vs. public cord blood banking
There are several reasons why customers choose to store cord blood. Firstly, the
search for suitable stem cells from public cord blood banks for stem cell treatments is
usually time-consuming and costly. The Singapore Cord Blood Bank (SCBB)
charges a hefty S$26,000 search fee for local residents and US$25,000 for foreigners,
which is in addition to hospital transplant fees. Secondly, by storing an individuals
cord blood in a private cord blood bank, that individual is assured of a 100% match if
he were to use it on himself or a 40% chance match among immediate family
members should they require stem cell treatments.
To date, management has guided that Cordlife Group has released 10 units of cord
blood for its customers, all of which had been successfully engrafted in its patients.
9Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Pricing
Cordlife offers flexible pricing policies for its cord blood banking services, which are
competitive with competitors such as StemCord. The storage period for Singapore
customers is 21 years, after which the cord blood beneficiary will decide whether he
or she wants to continue storage. Payments can be made using the Child
Development Account (CDA) as Cordlife is an Approved Institution. The CDA is
part of the Baby Bonus scheme and is a savings account where parents deposits are
matched dollar for dollar by the government, up to a cap varying from $6,000 to
$18,000 (depending on the child order).
Table 6: Cord blood banking prices in Singapore and Hong Kong
Singapore Hong Kong
Cord Life StemCord Cord Life
Plan 1 Plan 2 Plan 3 Sole plan Plan 1 Plan 2 Plan 3 Plan 4
Upfront payment S$1,950 S$4,200 S$6,200 $1,580 HK$19,000 HK$23,500 HK$29,500 HK$36,000
Annual paymentS$250
(from yr 1-20)
S$250
(from yr 11-20)-
$275
(from yr 1-20)
HK$1,500
(from yr 1-18)
HK$1,500
(from yr 5-18)
HK$1,500
(from yr 10-18)-
Total S$6,950 S$6,700 S$6,200 S$7,080 HK$46,000 HK$44,500 HK$43,000 HK$36,000
Storage period
(yrs)21 21 21 21 18 18 18 18
Source: Company data.
Revenue structure
Revenue is derived mainly from the provision of cord blood banking services and is
recognized based on a percentage of completion (POC) method. Given that expenses
for processing cord blood samples are front loaded, 88% of revenue is recognized in
the initial year of cord blood storage, while the remaining 12% is recognized in
approximately equal portions at the completion of each year of storage.
In FY12, South Asia operations, which consists of Singapore, the Philippines and
Indonesia, accounted for 75% of revenue, while North Asia operations, consisting of
Hong Kong, China and Macau accounted for the remaining 25%. As highlighted
earlier, Singapore is a more profitable market with gross margin at c.70%. Business
conditions in Hong Kong are more challenging due to the nature of the healthcare
system. The seemingly higher proportion of North Asia profit against revenue is due
to the share of associates' earnings from the company's 10% stake in China Stem
Cells (South) which does not record attributable revenue.
10
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Figure 6: Cordlife's revenue distribution
Source: Company data.
Figure 7: Cordlife's profit distribution
Source: Company data.
Cost structure
For FY12, cost of sales comprised 35% of total operating costs. This includes
expenses in processing, testing and storage of cord blood, salaries for lab personnel,
depreciation of lab equipment and lab rental expenses.
Administrative expense contributes 37% towards total operating costs and relates to
non-lab staff salaries, cost of consultancy services relating to finance and
administration, depreciation of office and office rental expenses.
Selling and marketing expenses comprise of advertising activities, salaries for
marketing personnel and commissions (when referrals are made).
Figure 8: Cordlifes cost structure
Source: Company data.
The Company reported healthy gross margin averaging 71.6% over the past four
years. In FY12, gross margins fell marginally by 1 percentage point due to an
increase in the cost of maternal blood testing brought about by increased stringency
of the AABB standards.
North Asia
25%
South Asia
75%
North Asia
27%
South Asia
73%
COGS
35%
Selling and
marketing expenses
28%
Administrative
expense
37%
11
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Figure 9: Revenue and gross margins
S$ in millions
Source: Company data.
Key risks
We highlight below a few key risks to Cordlifes business:
Competition in Singapore
In July 2013, it was announced that AsiaMedic announced a joint venture with
Cryoviva International to establish a cord blood banking venture in Singapore. It will
be the 3rd
player in Singapore. The strong margin which Cordlife enjoys in Singapore
may come under pressure if pricing competition ensues.
Lack of medical developments in cord blood usage
Adoption of cord blood banking is dependent on the customers perceived expected
benefits of cord blood. Cord blood therapy is still at an early stage of development
and has a few limitations, such as the riskiness of treatment, long term viability of
cryogenically frozen cord blood, and the insufficiency of a typical single cord blood
harvest to treat an adult (one harvest typically has enough cells to treat a person up to
50kg). Therefore, the lack of medical developments may reduce adoption rate for
cord blood banking.
Slow penetration of cord blood banking in Philippines, India, and Indonesia
While the developing markets present potential through the large number of births,
penetration rates remain low. Given the recent acquisitions in the Philippines, India
and Indonesia region (which has only just achieved breakeven), the risk that market
penetration does not increase as expected is a concern.
Regulatory risks
Changes in the regulatory environment which Cordlife operates in can pose risks. For
example, a change in the blood testing requirements under the AABB had caused an
increase in costs and decrease in profit margins for Cordlife in FY12. Similarly, a
reduction in the Baby Bonus scheme could put pressures on profits. Additionally, the
recent moratorium which banned Mainland Chinese mothers from giving birth in
Hong Kong impacted revenues in Hong Kong.
68%
69%
70%
71%
72%
73%
74%
0
5
10
15
20
25
30
35
FY09 FY10 FY11 FY12
Revenue (L) Gross margin (R)
12
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Major shareholders
Table 7: Major shareholders
Shareholders %
Wells Spring Pte Ltd 10.84
Coop International Pte Ltd 10.52
China Stem Cells (East) Co Ltd 10.48
Mr. Yee Pinh Jeremy 0.71
Ms Jin Lu 0.28
Dr. Ho Choon Hou 0.27
Cordlife Group Ltd 0.09
Free Float 65.9
Source: Bloomberg, J.P. Morgan.
13
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
Cordlife Group Limited: Summary of financials
SGD in millions, year-end Jun
Profit and loss statement Cash flow statement
FY10 FY11 FY12 FY10 FY11 FY12
Revenues 28 26 29 Net profit 8 8 7
% change Y/Y 25% -9% 12% Depreciation & amortization 0 1 1
EBITDA 8 7 5 Other non-cash items 1 0 1
% change Y/Y 16% -14% -30% Change in working capital 0 1 -1
EBITDA margin (%) 28% 26% 16% Cash flow from operations 8 8 6
EBIT 7 6 4 Capex -2 -3 -2
% change Y/Y 15% -17% -35% Disposal/ (purchase) -11 -1 -18
EBIT margin (%) 26% 24% 14% Cash flow from investing -13 -4 -20
Net interest 0.0 0.0 0.0 Equity raised/(repaid) 0 0 26
Earnings before tax 7 6 4 Debt raised/(repaid) 0 0 2
% change Y/Y 15% -17% -34% Other 6 -7 0
Tax -2 -1 -1 Dividends 0 0 -5
as % of EBT 21% 24% 21% Cash flow from financing 6 -7 23
Minority Interests 0 0 0 Net changes in cash 1 -3 9
Net income 8 8 7 Beginning cash 7 8 4
Net income (recurring) 8 8 9 Ending cash 8 5 13
% change Y/Y 34% 2% 4%
Share outstanding 232 232 232 Free cash flow 7 5 4
EPS (S$) (recurring) 0.04 0.04 0.04 DPS (S$) 0.00 0.00 0.02
Balance Sheet Ratio Analysis
FY10 FY11 FY12 FY10 FY11 FY12
Cash 8 4 19 EBITDA margin (%) 28% 26% 16%
Accounts receivable 8 7 9 EBIT margin (%) 26% 24% 14%
Inventories 0 0 0
Others 5 2 1
Current assets 21 13 29
LT investments 21 23 26 Sales growth (%) 25% -9% 12%
Net fixed assets 2 4 6 EBITDA growth (%) 16% -14% -30%
Total Assets 59 55 90 Net profit growth (%) 34% 2% -18%
ST bank loans 1 0 0 Net profit (recurring) growth (%) 34% 2% 4%
Payables 1 0 1
Total current liabilities 21 8 8 Interest coverage (x) 171 156 313
Long term debt 0 1 2 Net debt/equity (%) Net cash Net cash Net cash
Other liabilities 5 6 8
Total liabilities 26 15 19 Sales/Assets (%) 48% 46% 32%
Shareholder's equity 33 41 71 Assets/Equity (%) 178% 137% 127%
Total liabilities and equity 59 55 90 ROCE (%) 28% 23% 12%
BVPS (S$) 0.14 0.17 0.31 ROE (%) 25% 21% 10%
Source: Bloomberg.
14
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
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expressed by the research analyst(s) in this report.
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Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.jpmorganmarkets.com.
Coverage Universe: Chan, Ying-Jian: Astra Agro Lestari (AALI.JK), BW Plantation (BWPT.JK), China Agri-Industries (0606.HK),
Felda Global Ventures (FGVH.KL), First Resources Limited (FRLD.SI), Genting Plantations (GENP.KL), Golden Agri-Resources Ltd
(GAGR.SI), IOI Corp. (IOIB.KL), Indofood Agri Resources Ltd (IFAR.SI), Kuala Lumpur Kepong (KLKK.KL), London Sumatra
Indonesia (LSIP.JK), Mewah International Inc (MEWI.SI), Noble Group Ltd (NOBG.SI), Olam International Limited (OLAM.SI), Salim
Ivomas Pratama (SIMP.JK), Sime Darby Berhad (SIME.KL), Wilmar International Limited (WLIL.SI)
J.P. Morgan Equity Research Ratings Distribution, as of June 28, 2013
Overweight
(buy)
Neutral
(hold)
Underweight
(sell)
J.P. Morgan Global Equity Research Coverage 44% 44% 12%
IB clients* 56% 50% 40%
JPMS Equity Research Coverage 42% 50% 8%
IB clients* 76% 66% 55%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst
or your J.P. Morgan representative, or email [email protected].
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Other Disclosures
15
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
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16
Asia Pacific Equity Research
01 August 2013
Ying-Jian Chan, CFA
(65) 6882-2378
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Key highlights from the meetingMarket leader position in SingaporeExpansion of services and geographyReaping economies of scale with Asias largest private cord blood storage facilityStable recurring cash flow and dividends indication
Industry growth prospectsCompany backgroundGrowing footprint across AsiaProduct mixPricingRevenue structureCost structure
Key risksMajor shareholdersCordlife Group Limited: Summary of financials