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Cordlife to Undertake Private Placement

cordlife logoCordlife Group Limited (SGX: P8A), a service provider of umbilical cord blood and tissue banking with operations in Singapore, Hong Kong, India, Indonesia and The Philippines, announced that it is issuing new shares to private investors at S$1.25 per share, with up to 26,838,000 shares in total. Cordlife is looking to raise up to S$33,547,500.

The names and information of the subscribers who will be offered the shares are detailed in the announcement. The reasons for the share placement are as follows:

  1. To expand its business (S$23.5 million)
  2. To fund the daily operations of the business (S$8.6 million)
  3. To pay the fees and expenses incurred to undertake the private placement (S$1.4 million)

After the placement, the total number of issued shares will be 267,325,354. This number also includes the “expected issue and allotment of the 8m shares in respect of which in-principal approval for listing has been obtained from the SGX-ST on 26 September 2013, which is to be utilised towards part payment relating to the Company’s acquisition of a 19.92% interest in StemLife Berhad.”

This means that minority shareholders will face a dilution of 15% if all the planned number of shares is issued. Dilution means that the minority shareholders effectively have to share their profits and dividends with the new subscribers, which translates to a lower portion for themselves.

The company’s shares have already seen gains of almost 160% since it went public last year. Currently, it is trading at S$1.285. With a lofty valuation of 22 times earnings and a dividend yield of 1.6% (with interest rates on its outstanding loans going at 1.5% to 2.4%, depending on the maturity), management might have felt that a private share placement might be the best option.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.