New shareholder may be 'new blood' needed for Cordlife's anaemic trajectory
LET'S face it - Cordlife Group is long overdue for a reset. The mainboard-listed cord blood banking and family diagnostic services provider has done nothing remarkable in recent years - except to survive.
Its one big hurrah was six years ago, when it sold its shares and convertible notes in China Cord Blood Corp - mainland China's first and largest cord blood group - and pocketed handsome gains, sharing the sweetness with shareholders in the form of a special dividend of S$0.13 per share.
The company's much-trumpeted goal to expand in South-east Asia has come to little. And the controversial exit of its long-serving chief executive Jeremy Yee, which revealed cracks in the company's board and management, has not helped. India, a market it had banked on and where it had splurged on marketing to bring in big volumes, took more than it gave back.
Revenue has more or less flatlined in recent years while its earnings trajectory has been nothing to shout about. And its reputation as a dividend slouch still persists. Going by its 9-month showing, this year is working out to be little different.
In other words, the investing story for this healthcare services stock with a market value of some S$102 million is flat out dull. The stock is down nearly 4 per cent this year, and trades at 15.3 times - versus the average of 21 times among peers in the region.
Change in the air
There is, however, a whiff of change in the air. Three married deals were done recently involving a big chunk of its shares, driving the stock to a two-year high of S$0.49 on Nov 10 - up 15 per cent from the day before.
Filings later in the day revealed that TransGlobal Real Estate Group, whose voting rights are equally held by Lui Yim Sheung and Yiu Chi Shing, has emerged with a 27.99 per cent stake in Cordlife. Yiu is chairman of TransGlobal Group (International), which is principally engaged in real estate development and operation, as well as financial investments and infrastructure in Hong Kong and mainland China.
Yiu has since installed his son as a a non-independent non-executive director. Cordlife announced on Tuesday (Nov 30) that Yiu Chi Shing will join the board effective Wednesday.
TransGlobal paid S$37.2 million or S$0.52 a piece - a 22.4 per cent premium over Cordlife's previous day's close - to acquire the block from Cordlife's previous controlling owner Hon Kwok Lung, a Hong Kong tycoon.
Hon's exit from Cordlife comes three years (short of four days) since he first emerged in the picture. He first scooped up a 21.5 per cent stake in Cordlife from its majority owner China Construction Bank Corp and paid S$25 million or S$0.45 apiece.
Less than a year later, he raised his stake to nearly 28 per cent - coughing up S$10 million for the additional shares. Interestingly, the self-made tycoon, who made it to Forbes' Billionaires 2018 list, took this bigger bite of Cordlife just about a month after the company had lobbed a proposal in June 2019 to merge its business with New York-listed Global Cord Blood Corporation (GCBC), which was formerly called China Cord Blood Corp. The deal, potentially worth S$1.3 billion and deemed a game changer for Cordlife, flopped in February this year with both parties deciding to bow out from talks.
The timing of Hon's exit could suggest that sans this sizeable M&A play, his interest in Cordlife had waned.
But he may not be the only one disappointed.
Cordlife's second largest shareholder Nanjing Xinjiekou Department Store, a Shanghai-listed retail giant, had also bought into the company five years ago, describing the acquisition as one aimed to "aid" Cordlife's expansion into the cord blood business in South-east Asia. But very little has happened on this front.
What now?
Inorganic expansion has long been a vaunted goal for this once-upon-a-time growth stock. For what seems like forever, Cordlife has said it wants to enlarge its geographical footprint, introduce new consumer healthcare products and forge collaborative networks and strategic alliances. It has also been seeking to expand its mother and child segment.
The "buy and build strategy" is in fact an imperative for Cordlife, which has been facing rising competition in Singapore, chiefly from public cord blood banking, and low fertility rates.
Cordlife also has operations in Hong Kong, Indonesia, India, Malaysia and the Philippines. Three years ago, Cordlife became a leading player in Hong Kong after it forked out US$7 million to acquire the largest private cord blood bank there, Healthbaby Biotech (Hong Kong) Co. Since then, there has been nothing on the M&A front.
The quiet is especially surprising since Cordlife had a cash hoard of S$73.2 million as at end-September 2021, which is more than 70 per cent of its current market value.
The big question now is: will the entry of a new controlling owner and the ensuing board shuffle, among others, be the driving force for growth that has long eluded Cordlife?
