Cordlife’s business reset may give minority shareholders the best chance to bail out fast

CORDLIFE Group has been granted a reprieve, following the Ministry of Health’s (MOH) notice on Aug 29 that it could resume some cord-blood banking services in a “controlled manner” from Sep 15.

Although this signals that things could be getting back on track, some upcoming personnel departures show that the company is not quite out of the woods yet – and investors may need to look for an exit, fast.

The counter has been in dire straits since Cordlife’s Singapore operations were suspended for six months from collecting, processing, testing or storing new cord-blood units in December last year.

This comes after seven of its then 22 storage tanks were found to have been exposed to temperatures above acceptable limits since November 2020.

The group was subsequently slapped with an additional three-month suspension, which took effect from Jun 15.

In total, the Singapore operations of the private cord-blood bank have been unable to collect new cord-blood units for nine months. The suspension sent the group into the red – it reported a net loss of S$12.4 million for the six months ended Jun 30. While Cordlife does have operations regionally, such as in Hong Kong and India, Singapore brought in the bulk of its revenue.

As a result, the stock has generally fared poorly over these nine months. On Nov 30 last year, shares of Cordlife closed at S$0.455. On Wednesday (Sep 18), they ended at S$0.173.

As at Wednesday, Cordlife was trading at a 62 per cent discount to its book value, based on Bloomberg data. It has total returns of negative 56.2 per cent year to date, compared to the benchmark Straits Times Index, which garnered 16.2 per cent total returns over the same period.  

Following rectifications made under MOH’s guidance, Cordlife’s suspension was partially lifted. It can now collect up to 30 units of new cord blood each month from Sep 15 to Jan 13, 2025. (*see amendment note)

Cordlife also announced on Tuesday that it had upgraded its laboratory monitoring system, hired more senior staff, and improved its processes.

Indicating that confidence could be returning, the group said that it has already started receiving sign-ups from new customers. After the news, its share price jumped 17.7 per cent to S$0.173 on Wednesday. 

However, the optimism surrounding this has been dampened by announcements of key personnel departures.

Cordlife announced in late August that its group director of brand development, Woon Geok Peng, will be resigning from her post in October to “pursue personal interests”.

On Sep 9, the company said that Tan Huiying, group director of quality and operations, is leaving in November for the same reason. 

Woon and Tan have held these posts since July 2016. By their last day, the pair would have spent seven years each in their current roles. Cordlife said it will fill these positions before the departures to ensure “a smooth transition”.

Shareholder uncertainty

With two resignations of long-time staff occurring within such a short period, uncertainty continues to hang over Cordlife’s prospects. On the corporate governance front, there has also been much upheaval.

From March to May this year, the company was embroiled in a dispute between its substantial shareholders, TransGlobal Real Estate Group and Nanjing Xinjiekou Department Store.

According to Cordlife’s annual report, TransGlobal has a 27.9 per cent stake in the company, while Shanghai-listed Nanjing Xinjiekou holds about 20.2 per cent interest. Nanjing Xinjiekou is affiliated with Chinese conglomerate Sanpower Group Corporation.

Over these months, the two shareholders sent letters requisitioning resolutions to remove directors from Cordlife’s board. Bourse filings revealed that Nanjing Xinjiekou’s nominee directors “expressed reservations” about the appointment of Cordlife’s group chief executive Ivan Yiu, who has familial links to TransGlobal.

Nanjing Xinjiekou also filed an injunction against Cordlife to cancel a private placement that would have raised S$8.2 million.

The spat culminated in the removal of three directors, including Cordlife co-founder Ho Choon Hou, during the company’s annual general meeting (AGM) in May. Nanjing Xinjiekou’s nominee directors took up these places on the board.

The group also redesignated Nanjing Xinjiekou’s senior associate president Chen Xiaoling, who was already on the board before the AGM, to the position of group executive director.

In August, Nanjing Xinjiekou said that it was no longer considering increasing its stake in the mainboard-listed cord-blood bank, despite previously expressing interest in making an offer for shares of Cordlife it does not already own.

An entity linked to Nanjing Xinjiekou also dumped its 10 per cent stake in Cordlife in early August. The group did not disclose who had bought these shares.

TransGlobal has been quiet since the AGM, although its nominee directors remain on the board.

For the moment, it appears that there is an uneasy peace between the two largest shareholders.

Difficult decision for minority investors

With uncertainties at every turn, minority investors can’t be faulted if they were to consider exiting. But the current share price is still a long way from where it used to be, and they face a difficult time finding their way out.

It also possibly faces looming class-action lawsuits from furious customers, with at least two known groups working on gaining compensation. Such uncertainty will weigh on the company for some time to come.

Some bright spots, such as MOH’s latest notice, could give investors hope. However, Cordlife still needs to work on fully resuming its collection of new cord blood and restoring confidence among investors and customers.

Perhaps what the group needs is a white knight investor who could throw a lifeline to minority shareholders still invested in Cordlife. However, investors who do not have the patience to wait for that turnaround should consider cutting the cord on Cordlife, or risk being left in the cold.

*Amendment note: The misstated date has been corrected to Jan 13, 2025.