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Can Cordlife Group Ltd Continue its Growth Going Forward?

An uptick in the number of client deliveries helped to boost the full year revenue of Cordlife Group Ltd (SGX: P8A), a private cord blood banking outfit. This was announced yesterday evening.

Cordlife is one of the two private cord blood banks in Singapore and the second largest in Hong Kong. Cord blood, which is the blood found in the umbilical cord and placenta, provides a rich source of blood stem cells that can be used in the treatment of leukaemia, immune, and other genetic diseases.

For the financial year ended 30 June 2014 (FY2014), the firm achieved revenue of S$49.1 million, a surge of 41.5% over FY2013. This was on the back of an increase in client deliveries from 7,700 a year ago to 15,880. Much of the growth came from new markets in the Philippines, India, and Indonesia – Cordlife had acquired cord blood banking businesses in those countries in June 2013. Consequently, gross profit saw an increase of 37.6% year-on-year to S$34.9 million due to the increase in new client deliveries.

Other operating income rose manifold to S$1.3 million due to grants from Singapore Government agencies, rental income and upfront fees for providing training and know-how transfer services.

Due to the increase in other operating income, fair value changes, and gain on transfer of investment in associate, net profit more than doubled to S$30.4 million from S$13.5 million a year ago. As a result, Cordlife’s diluted earnings per share had increased from S$0.058 in FY2013 to S$0.119 currently.

Cordlife’s balance sheet had improved compared to a year ago. As of 30 June 2014, its net cash position had increased to S$19.7 million (S$32.6 million in cash; S$12.9 million in total debt) from just S$2.2 million (S$8 million in cash; S$6.2 million in total debt) a year ago. It must be noted however, that much of the increase in Cordlife’s cash hoard had been the result of issuing new shares in October 2013 under a private placement exercise.

A final dividend of S$0.010 per ordinary share has been proposed, unchanged from FY2013.

Will the positive showing from the private cord blood bank continue in the future?

The firm feels that certain initiatives from the Singapore Government, such as the S$2 billion Marriage & Parenthood Package and Jubilee Baby Gift for parents of babies born next year, will bode well for the company going forward. 2015 marks the 50th year of Singapore’s independence.

Deloitte projects the private cord blood banking segment’s incremental cord blood storage in Singapore to grow at 9% yearly from 2011 to 2015. In Indonesia, the Philippines and India, projected annual rates of growth are at 38%, 35%, and 35% respectively. In China, the market is expected to grow at 23% by 2015.

To cope with the forecasted increase in demand, Cordlife would be “expanding its geographical footprint for cord blood and umbilical cord lining banking business as well as other newly-introduced products catering to the mother and child segment”.

Cordlife’s shares last changed hands at S$1.23 on Tuesday, representing a trailing price/earnings ratio of 10.

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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.