Cordlife Group Limited ("Cordlife" or the "Company") was set up in Singapore. It has 2 core businesses: cord blood banking and umbilical cord tissue banking. It was previously listed on Australia Stock Exchange and known as Cygenics Limited.
It now focuses on 3 countries, Singapore, Hong Kong and China. Revenue grew from S$22.6m in FY2009 to S$25.7m in FY2011 while profit grew from S$6.2m to $8.5m during the same period. The Company intends to distribute 25% of its profit attributable to shareholders for FY2011 and FY2012.
The Company will issue 60m shares (2m public 58m placement) at Singapore 49.5 cents each. The offer will close on 27 March at 12pm. Assuming the service agreement was in place and based on the enlarged share cap, the EPS for FY2011 was 3.94 cents and that translate into a listing PER of 12.56x. The market cap at the issue price is S$104.5m.
Frankly to me, the business model is somewhat like a "specialized" storage hub whereby tenants pay a yearly rental to rent a storage space. Cordlife charges a one time fee as well as a fixed period of 5 or 10 years followed by an annual fee for the next 13 or 8 years. The blood can be stored up to a 18 years. I think the likelihood of 'tenants' switching from one storage to another is low and the 'loyalty' is high since they have already sunk in the most expensive investment at the birth of their children. It is an interesting business model.
ASX shareholders received Cordlife shares as part of the restructuring a few years back. After the listing Singapore public holds about 26% while the ASX investors hold about 47%. Interestingly, the CEO only holds 0.57%. In my view, there is not much 'skin in the game' for him. In addition, i don't really like companies that does a lot of financial engineering and you can see that the shareholders are all experts in this area. Cordlife Limited (ASX:CBB) that is listed on ASX only has 2 profitable years from 2004 to 2011. In this regard, i dont think the ASX shareholder that receive shares of Cordlife Group Limited are "happy" shareholders. I think they will be the first to run for the exit door if the share price performs well.
Assuming the EPS remained unchanged from FY2011, the dividend per share will be around 3.94 cents x 25% = 0.985 Singapore cents. That translate into a yield of 1.99%. The yield may provide some downside protection as listing PER is high but the question for me remains whether the Company will be able to sustain and grow its income in the coming years.
Personally, i will avoid this counter.