Cordlife Group Ltd Expected Total Return (%) 34.1%internetfileserver.phillip.com.sg/.../SG/Cordlife20130408.pdf · Cordlife has a Right of First Refusal (ROFR) for the acquisition

MCI (P) 194/11/2012 Ref. No.: SG2013_0066 1 of 21

Cordlife Group Ltd

Strong FCF generation at a reasonable price Bloomberg │ Reuters │ POEMS

CLGL SP │ CORD.SI │ CLGL.SG

Industry: Medical & Healthcare

Phillip Securities Research Pte Ltd

8 April 2013

Report type: Initiation

Raw Beta (Past 2yrs w eekly data) n.a.

Market Cap. (USD mn / SGD mn) 121 / 150

Enterprise Value (USD mn / SGD mn) 115 / 143

3M Average Daily T/O (mn) 2.0

52 w eek range (SGD) 0.41 - 0.7

Closing Price in 52 w eek range

Major Shareholders (%)

10.5

9.4

3. Coop International Pte Ltd 8.8

2. Lau Wai Chi Stellan

1. China Stem Cells East Co Ltd

0

20

40

60

80

100

120

140

160

180

200

0.40

0.50

0.60

0.70

0.80

Apr-1

2

Jul-1

2

Oct-1

2

Jan-1

3

Volume, mn CLGL SP EQUITY STI rebased

0% 50% 100%

Key Financial Summary

FYE 12/12 12/13F 12/14F 12/15F

Revenue (SGD mn) 28.8 33.8 36.8 41.2

Net Profit, adj. (SGD mn) 8.8 9.4 10.0 11.3

EPS, adj. (SGD) 0.038 0.040 0.043 0.048

P/E (X),adj. 17.0 16.0 15.0 13.3

BVPS (SGD) 0.306 0.330 0.348 0.369

P/B (X) 2.1 2.0 1.9 1.7

DPS (SGD) 0.038 0.025 0.027 0.030

Div. Yield (%) 5.9% 3.9% 4.2% 4.7%

Source: Bloomberg, PSR est.

*All multiples & yields based on current market price

Valuation Method

SOTP

Analyst

Derrick Heng

[email protected]

+65 6531 1221

Cordlife Group Ltd

Rating 1 Buy

- Previous Rating n.a. Not Rated

Target Price (SGD) 0.84

- Previous Target Price (SGD) n.a.

Closing Price (SGD) 0.645

Expected Capital Gains (%) 30.2%

Expected Dividend Yield (%) 3.9%

Expected Total Return (%) 34.1%

Company Overview Cordlife Group (Cordlife) is a provider of cord blood and tissue banking services. Cordlife operates primarily in Singapore and Hong Kong, but offers indirect exposure to China with a 10% stake in China Cord Blood Corporation.

Core earnings to increase at CAGR of 8.5%. Strong FCF generation to sustain high dividend payout

to shareholders. Potential venture into complementary products. Acquisition of assets from CBB would drive

geographical diversification into emerging markets. Undemanding valuations for a defensive stock. Initiate with Buy, TP of S$0.84. We initiate coverage on Cordlife with a Buy recommendation and TP of S$0.84. The key reasons for our positive view are as follow: #1: Expect core earnings to increase at CAGR of 8.5% over the next 3yrs. With increasing awareness of cord blood banking, we expect market penetration of Singapore and Hong Kong to improve materially over the next 3yrs. Cordlife is well positioned to benefit from this positive trend as one of the few private cord blood banking service providers in these markets. Furthermore, we believe that the Singapore government would keep policies accommodative to stimulate the current low level of birth rates (TFR target: 1.4-1.5 vs 2012E: 1.28-1.30) in the country. This is evident by a recently announced S$2bn package to promote marriage and parenthood. Fig 1: Profit Trend (S$’mn)

Source: PSR est.

0

2

4

6

8

10

12

FY09 FY10 FY11 FY12 FY13E FY14E FY15E

Net Income, adj. CAGR 12-15E: 8.5%

#2: Strong FCF generation to sustain high dividend payout to shareholders. We expect Free Cashflow (FCF) to trend north from FY14E onwards as maintenance CAPEX requirements are likely to stay low. FCF generated by the company is highly visible and is backed by annual cashflow streams of c.S$6.25mn from the 25k existing customers on annual payment plans. We expect the strong cash generated to sustain a payout ratio of c.60% in the next 3yrs.

Cordlife Group Ltd Singapore Equities Research 8 April 2013

2 of 21

Fig 2: Free Cashflow (S$’mn)

Source: PSR est.

0

1

2

3

4

5

6

7

8


Free Cashflow

#3: Potential venture into complementary products. Cordlife announced a strategic alliance with Cordlabs Asia to offer umbilical cord tissue banking services beyond its current market in Hong Kong. The alliance would allow Cordlife to provide the services in India, Indonesia, Malaysia, Philippines, Singapore and Hong Kong on an exclusive basis and in Thailand on a non-exclusive basis. We believe that this alliance would leverage on the company’s existing network and open up new growth markets for the group. #4: Acquisition of assets from CBB would drive geographical diversification into emerging markets. Cordlife has a Right of First Refusal (ROFR) for the acquisition of various operating assets in Philippines, Indonesia & India from Cordlife Ltd (CBB), the Australia listed entity that owned Cordlife Group prior to its demerger in June 2011, should the company decide to divest. Acquisition of these entities would provide Cordlife with geographical diversification into emerging markets that have higher birth rates and lower market penetration. The recent results of CBB suggest that its operations in the emerging markets could start turning profitable soon. As long as they do not overpay for these emerging assets, we view any potential acquisition as a positive catalyst for the stock. #5: Undemanding valuations for a defensive stock. Lastly, we find the valuations for the stock of Cordlife as undemanding on various matrices. Despite the defensive nature of its business, the stock of Cordlife trades at a forward P/E of only 15X. Adjusting for the cash, liquid investments and market value of Cordlife’s stake in China Cord Blood Banking Corp, the core business of the company would offer a market leading FCF yield of c.7% in FY14E and beyond. With the stock trading at our bear case valuation level, we see limited downside at this entry point.

Fig 3: Forward P/E of 15X

Source: Bloomberg, PSR

15.2

10

12

14

16

18

20

Fe

b-1

2

Ma

r-12

Ap

r-12

Ma

y-1

2

Ju

n-1

2

Ju

l-12

Au

g-1

2

Se

p-1

2

Oct-1

2

Nov-1

2

Dec-1

2

Ja

n-1

3

Fe

b-1

3

Ma

r-13

Ap

r-13

Ma

y-1

3

Ju

n-1

3

Forward P/E (X)

Fig 4: High levels of FCF yield (%)

Source: PSR est.

3.5%4.0%

7.0%7.6%

0%

2%

4%

6%

8%

10%

FY12 FY13E FY14E FY15E

Adjusted FCF yield (%)


3 of 21

Financial Summary Deeper market penetration in Singapore to drive revenue growth After building in increased client deliveries from deeper market penetration in Singapore, we expect revenue to increase by 13% p.a. till FY15E. Our revenue growth forecasts are conservative and already lower than the 18% y-y revenue growth in 1HFY13 that is driven by 550 more deliveries. Hong Kong market to contract, mitigated by price hikes We expect Cordlife’s business in Hong Kong to contract in CY13 due to the negative impact of policy restrictions on deliveries by mainland women in Hong Kong. While the policy measures are negative for Cordlife, we opine that the impact would be softened by a price hike of c.7-9% (PSR est.) over the past yr. As its business in Singapore had been the main earnings driver, we believe that the impact of a contraction in the Hong Kong would not be material to the group. Fig 5: Forecasting CAGR growth of 13% to FY13E

Source: PSR est.

0

5

10

15

20

25

30

35

40

45


Revenue CAGR 12-15E: 13%

Cost components We estimate that 35% of the company’s cost structure is in items that are variable in nature (mainly expenses associated with the conduct of the procedure). As the company had effectively locked in longer term overheads after moving into the new facility in Yishun, we expect administrative expenses to stabilize at S$8-10mn p.a. in the next 3yrs. While marketing expenses could continue trending higher, we believe that it should stabilize at c.23% of sales. Fig 6: Cost Structure

Source: PSR est.

Selling and

marketing

expenses

28%

Cost of Sales

35%

Administrative

expenses

37%

EBITDA margins to expand on better product mix and economies of scale EBITDA margins have contracted over the past 4 yrs as the company stepped up its marketing efforts and incurred higher variable costs to comply with a change in the AABB (an association involved in the field of transfusion medicine and cellular therapies, formerly known as American Association of Blood Banks) standards. However, we expect profitability to improve over the next 3yrs due to economies of scale and bigger contributions from the higher margin business in Singapore. Fig 7: Margins should expand on economies of scale

Source: PSR est.

0

2

4

6

8

10

12

14


26%

28%

30%

32%

34%

36%

38%EBITDA

EBITDA margin (%)

Profit contribution by geography After stripping out contributions from its mainland associates, Cordlife’s business in North Asia (mainly Hong Kong) had not been a meaningful profit contributor. South Asia (mainly from Singapore) remains a key profit driver with PBT contributions of c.S$7-9mn a year. With positive underlying business trends, we believe that its operations in South Asia will continue to be a driver of profits for the group. Fig 8: Revenue by geography (S$’mn)

Source: Cordlife

5.7 7.9 6.5 7.1

16.9

20.319.2

21.7

0

5

10

15

20

25

30

FY09 FY10 FY11 FY12

South Asia

North Asia

Fig 9: Profit by geography (S$’mn)

Source: Cordlife, PSR est.

6.99.0

8.3 7.5

(0.0)(0.1)0.8 0.2(2)

0

2

4

6

8

10

12

FY09 FY10 FY11 FY12

South Asia

North Asia

*Profit contributions adjusted to remove contributions from associates and added IPO expenses to South Asia for FY12.


4 of 21

Stable FCF to sustain dividend payout to shareholders We expect CAPEX to decline significantly in FY14E onwards as we estimate that its existing facilities in Singapore & Hong Kong would only have a blended utilization of 10% by the end of FY15E (based on facility space). Consequently, we have forecasted increasing Free Cashflows (FCF) of more than S$7mn/yr from FY14E onwards. FCF generated by the company is highly visible and is backed by annual cashflow streams of c.S$6.25mn from the 25k existing customers on annual payment plans. Furthermore, we expect recurring income stream to grow over time as the number of units stored at the company increases. Hence, we explicitly modeled in payout ratios of c.60% till FY15E, which would use up c.S$6mn/yr of cash inflow (c.80% of FCF). Our payout ratio assumption of 60% is higher than management guidance of at least 25% in its IPO prospectus as we believe that the strong cash generation and low gearing of its balance sheet should allow them to sustain a higher level of payout to shareholders. Fig 10: FCF to sustain at >S$8mn/yr after FY15E

Source: PSR est.

(6)

(4)

(2)

0

2

4

6

8

10


CFO CAPEX, net FCF

Fig 11: DPS (S$)

Source: PSR est.

0.038 0.025 0.027 0.030

62% 63% 62%

100%

0.000

0.010

0.020

0.030

0.040

0.050

FY12 FY13E FY14E FY15E

0%

20%

40%

60%

80%

100%

120%DPS Payout Ratio (%)


5 of 21

Valuation With strong cash generation from its matured business units, we believe that it is most appropriate to value the core business using a DCF approach. Cordlife also holds a significant 10% stake in China Cord Blood Corp that forms c.13% of our valuation of the stock. Due to its unique business model, we opine that Cordlife is not comparable to other healthcare stocks listed on the SGX on a relative valuation basis. As the cord blood banking business is highly dependent on local market conditions, we believe that comparing companies that operate in different countries is far from meaningful. There are no comparable global peers that operate in similar geography to Cordlife. Fig 12: 34% upside to our target price of S$0.84 Undemanding at P/E of 15X Given the defensive nature and positive growth outlook, we believe that the current P/E multiple of 15X undervalues the stock of Cordlife. Furthermore, the company has a very visible stream of future cashflows from its long term contracts with customers. At our target price of S$0.84, the stock would trade at a FY14/15E P/E of 19.6/17.4X respectively. Fig 13: Forward P/E of 15X


15.2

10

12

14

16

18

20

Fe

b-1

2

Ma

r-12

Ap

r-12

Ma

y-1

2

Ju

n-1

2

Ju

l-12

Au

g-1

2

Se

p-1

2

Oct-1

2

Nov-1

2

Dec-1

2

Ja

n-1

3

Fe

b-1

3

Ma

r-13

Ap

r-13

Ma

y-1

3

Ju

n-1

3

Forward P/E (X)

Sum of the parts Value Percent Per shr Remarks

(Base case valuation) S$'mn S$

Core Value of Company, DCF 145.3 74% 0.62 DCF (WACC: 9.0%, terminal g: 1%)

Stake in China Cord Blood Corp. 26.2 13% 0.11 Market Value (US$2.87/shr)

Enterprise Value 171.6 88% 0.74 Basis: FY14E

Add: Investments 19.9 10% 0.09

Add: Cash 10.1 5% 0.04

Less: Debt (5.5) -3% (0.02)

Equity Value 196.0 100% 0.84

Outstanding no. of shares ('mn) 232.7

Target Price (S$') 0.84

Current Market Price (S$) 0.645

F12M DPS (S$) 0.025

Price upside (%) 30.2%

Dividend yield (%) 3.9%

Total return (%) 34.1%

Source: PSR est.


6 of 21

SWOT Analysis Strength Brand awareness and goodwill in matured market With significant operating history in Singapore and Hong Kong, we believe that Cordlife has a well established brand name in these core markets. Marketing efforts over the years have led to strong brand recognition and significant amount of goodwill in the countries. Strong cash generative business After incurring significant CAPEX from moving into its new facility in Yishun, we expect minimal CAPEX needs for its business in Singapore over the next few years. Hence, we expect high levels of free cashflows to be generated by its business in Singapore, which should allow Cordlife to provide a stable stream of dividends to shareholders and supply the cash for investments into other areas of growth. Opportunities Leveraging on rich database of client information With its existing pool of cord blood under storage, Cordlife holds a rich database of client information. Hence, we believe that the company would be able to engage them as repeat customers for their subsequent babies or offer complementary products to them in the future. Expansion into emerging markets If Cordlife successfully acquires the operating assets from CBB, the company would be able to gain an exposure to the fast growing emerging markets. These emerging markets have lower levels of penetration and higher birth rates. Umbilical cord tissue banking Currently, Cordlife only offers umbilical cord tissue banking services in Hong Kong. However, the company recently announced a partnership with Cordlab Asia to offer umbilical cord banking services in Singapore, Hong Kong, Malaysia, Indonesia, Philippines and India on an exclusive basis and in Thailand on a non-exclusive basis. If successfully executed, this new business would open up a new source of income for the group. Revenue streams beyond existing contractual period Existing contracts for cord blood banking are for 21yrs and 18yrs in Singapore and Hong Kong respectively. Hence, we believe that upon contract expiry, there is the opportunity for contract renewal with the children of its existing clients.

Weakness Key markets have been experiencing low fertility rates As discussed below, the core markets of Singapore and Hong Kong had been experiencing fairly low fertility rates. Hence, growth in market size would likely be limited if this trend continues. Dependent on discretionary spending While there are merits associated with storing one’s cord blood, cord blood banking remains a discretionary form of spending. Hence, we expect the market size to shrink in times of weak economic conditions, when discretionary spending is scaled back. Threats Threat of substitute from public cord blood banks Cord blood units from public banks could be used for treatment as well. We believe that a significant increase in funding to administer public banks would increase the availability of samples and reduce the need for private storage of cord blood. Obsolescence of cord blood as a source of stem cells The cord blood banking business exists as cord blood is a rich source of stem cells. However, if advances in medical technology allow alternatives to develop, the business model could be under threat. Entrance of new players There are currently very few players providing private cord blood banking services in the countries that Cordlife operates in. Hence, competition is less aggressive in the oligopolistic market structure. Entrance of new players could disrupt the competitive landscape.


7 of 21

Porter’s Five Forces On the whole, we believe that Cordlife has a fairly strong competitive business position. While supplier power is generally strong as Cordlife is a price taker of fees charged by hospitals and doctors, we believe that the company has the ability to pass on any price hikes to its customers. Entry barriers are fairly high as marketing efforts over the years have built significant amount of goodwill and brand recognition in the core markets. We believe that this makes it prohibitively costly for new entrants to penetrate their markets.


8 of 21

Board of Directors and Senior Management

Name Position Remarks

Board of Directors

Dr. Ho Choon Hou Chairman, Non-Executive

Director

- Appointed in June 2011.

- Director at Southern Capital Group Ltd, Private Equity Firm.

- Bachelor of Medicine & Bachelor of Surgery (The University of

Sheff ield), Masters in Medicine (Surgery) (National University of

Singapore), MBA (Honours) (The University of Chicago)

Ms. Jin Lu Non-Executive Director - Appointed in July 2011.

- Executive Director of Golden Meditech Holdings (2000-2012)

- Bachelor in Foreign Language (Beijing International Studies University),

Executive MBA (Peking University).

Mr. Ho Sheng Lead Independent Director - Appointed in July 2011.

- Partner at Banamai Capital.

- Bachelor of Economics (University of Tasmania), Master of Applied

Finance (Macquarie University), an associate of the Institute of Chartered

Secretaries and Administrators (UK), senior associate of the Australian

Institute of Finance and Banking.

Dr. Goh Jin Hian Independent Director - Appointed in July 2011.

- Executive Consultant of Parkw ayHealth, Singapore.

- Group Executive Director of IAG Heathsciences Pte Ltd.

- Bachelor of Medicine and Bachelor of Surgery (National University of

Singapore), MBA (University of Hull), The Wharton Advanced

Management Program.

Mr. Ng Tiak Soon Independent Director - Appointed in November 2011.

- Self employed consultant

- Non-practicing member of the Institute of Certif ied Public Accountants,

member of Association of Chartered Certif ied Accountants (UK), member

of the Singapore Institute of Directors.

Senior Management

Mr. Yee Pinh Jeremy CEO, Execuitive Director - Appointed CEO in June 2011, Executive Director since Jan 2004.

- CFO of CBB prior to demerger in June 2011.

- Bachelor of Arts in Economic and Social Studies (Victoria University of

Manchester), Bachelor of Commerce (Murdoch University), Master of

Commerce (University of Sydney), MBA (Nanyang Technological

University), MBA (University of Chicago Booth School of Business).

Ms. Gw endolene Yeo

Teck Geok

General Manager,

Singapore

- Joined the group in Dec 2002.

- Diploma in Mass Communication (Ngee Ann Polytechnic), Bachelor of

Arts (Royal Melbourne Institute of Technology).

Ms. Cheung Wai Yee,

Emily

General Manager, Hong

Kong

- Joined the group in 2005.

- Graduate Certif icate in Business Administration, MBA (University of

South Australia).

Ms. Thet Hnin Yi Financial Controller - Joined group in June 2011.

- Joined CBB as Senior Finance Manager in Dec 2007.

- Diploma in Accountancy (Ngee Ann Polytechnic), a fellow of The

Association of Chartered Certif ied Accountants (UK), non-practising

member of the Institute of Certif ied Public Accountants of Singapore.

Source: Cordlife


9 of 21

Company Overview Cordlife Group (Cordlife) is a provider of cord blood and tissue banking services. Cordlife operates primarily in Singapore and Hong Kong, but offers indirect exposure to China with a 10% stake in China Cord Blood Corporation. The stock was listed on the mainboard of the Singapore Exchange on 29

th March 2012.

Business Segments Cordlife generates approximately 75% and 25% of its group revenue from businesses in South Asia (mainly Singapore) and North Asia (mainly Hong Kong) respectively. South Asia contributes almost all the profits for the group with its business in North Asia only marginally profitable. Majority of its existing revenue is attributable to the cord blood banking services as the umbilical cord tissue banking services was only started recently (launched in Hong Kong: Mar 2011). This makes Cordlife a single product company that is highly dependent on the cord blood banking industry. Fig 14: Revenue by geography (S$’mn)

Source: Cordlife

5.7 7.9 6.5 7.1

16.9

20.319.2

21.7

0

5

10

15

20

25

30

FY09 FY10 FY11 FY12

South Asia

North Asia

Fig 15: Profit by geography (S$’mn)

Source: Cordlife, PSR est.

6.99.0

8.3 7.5

(0.0)(0.1)0.8 0.2(2)

0

2

4

6

8

10

12

FY09 FY10 FY11 FY12

South Asia

North Asia

*Profit contributions adjusted to remove contributions from associates and added IPO expenses to South Asia for FY12.

What is cord blood banking? Cord blood is the blood that is removed from a baby’s umbilical cord at birth and is a rich source of stem cells. This provides an alternative to bone marrow as a source of stem cells that can be used for the treatment of various diseases. The risk free extraction is the main advantage of using cord blood, as compared to using bone marrow that requires a surgery. The process of collecting cord blood can be found on the company’s website: collection process. Subsequently, the cord blood that is extracted would need to be stored at very low temperatures for retrieval at a later date.

The cord blood that is stored is a perfect match for the baby, but it also has a high chance being compatible for the family members. Conceptually, we see it as similar to purchasing insurance for the baby and his/her family members. Public vs private cord blood banks Apart from private cord blood banking, such as services provided by Cordlife, public cord blood banks are also a source of cord blood. Cord blood samples that are stored at public banks are usually donated and could be used to support requirements from around the world. As such, unlike storing the person’s own cord blood at birth, a patient who requires cord blood for treatment may not be able to find a perfect match from public banks in the future. Singapore Singapore currently has 1 public and 2 private cord blood banking service providers. Singapore Cord Blood Bank (SCBB), the public cord blood bank in the country, holds inventories of 8,943 samples with diversity similar to the profile of Singapore’s ethnic groups. The samples held by the public bank are approximately 0.23% of the resident population (c.3.8mn) and 0.17% of the total population (c.5.3mn) in Singapore. Cordlife is the only AABB accredited private cord blood bank in Singapore. Fig 16: SCBB Cord Blood Inventory, as of 30 Sep 2012 (‘k)

Source: SCBB, PSR est.

Chinese, 5.5 ,

62%

Others, 1.0 ,

11%

Indian, 0.7 ,

8%

Malay, 1.7 ,

19%

Fig 17: Singapore Resident Pop., as of 30 June 2012 (‘k)

Source: Singstat, PSR est.

Malay, 510 ,

13%

Indian, 351 ,

9%

Others, 126 ,

3%

Chinese,

2,832 , 75%

http://www.cordlife.com/sg/en/how-cord-blood-collected


10 of 21

Population trends As with many developed nations, Singapore is currently experiencing a low level of fertility rate. At 2012’s Total Fertility Rate (TFR) of 1.28-1.30, Singapore is significantly below the replacement rate of 2.1. Consequently, Singapore’s government recently set a target to move the country’s TFR to 1.4-1.5 and had introduced an enhanced S$2bn “Marriage and Parenthood packages” to support this objective. Parents would receive a cash gift of S$6-8k for their newborn (1

st/2

nd: S$6k; 3

rd/4

th: S$8k) from the

government and savings to a Child Development Account (CDA) would be matched dollar-for-dollar by S$6-18k (1

st/2

nd:

S$6k; 3rd

/4th: S$12k; >5

th: S$18k). This significantly

subsidizes the cost of child rearing and benefits the private cord blood banking industry by supplementing the cost of using their services. Fig 18: Birth rates in Singapore

Source: SingStat

42.6

35

40

45

50

55

CY

90

CY

91

CY

92

CY

93

CY

94

CY

95

CY

96

CY

97

CY

98

CY

99

CY

00

CY

01

CY

02

CY

03

CY

04

CY

05

CY

06

CY

07

CY

08

CY

09

CY

10

CY

11

CY

12

1.01.11.21.31.41.51.61.71.81.92.0Live birth in Singapore ('k), LHS

TFR, RHS

Market share There is currently 2 private cord blood banking service providers in Singapore. While both Cordlife & StemCord do not breakdown the exact number of samples held in the country, Cordlife was estimated to have a market share of 62% by deliveries in 2010. According to the company’s website StemCord stored more than 30k samples since 2002, which is marginally lower than the > 40k samples held between Singapore and Hong Kong for Cordlife. Fig 19: Market share of private cord blood banks by deliveries in 2010 (‘k)

Source: Cordlife, PSR (for CY2010)

Stemcord, 3.5

, 38%

Cordlife, 5.8 ,

62%

Hong Kong Hong Kong has 1 public and 5 private cord blood banking service providers. There is very limited information on Hong Kong Red Cross, the only public cord blood bank in the country. However, according to a news article on the South China Morning Post, dated 18

th Sep 2012, the bank stored

about 3,600 samples and had been in operation since 1998. The number of samples held by the public bank is approximately 0.05% of the total population of Hong Kong (c.7.2mn). Population trends Similar to Singapore’s population trend, TFR in Hong Kong remained below replacement levels at 1.25 in 2012. The birth rates in Hong Kong have improved significantly due to the influx of mainland women giving birth in Hong Kong. Within this group, babies born in Hong Kong, due to mainland women whose spouses are not Hong Kong’s permanent residence, increased significantly over the years (2011: 35.7k vs 2001: 0.6k). This was due to a court ruling in 2001 stating that babies born in Hong Kong to mainland nationals have a right of abode in the country. However, this trend of increasing birth rates in Hong Kong had put a significant strain on the resources in the country. Consequently, a policy to restrict mainland women from giving birth in Hong Kong was imposed (2012 quota: private hosp. - 31.0k; public hosp. - 3.4k). This restriction is probably the reason for a decline in birth rates in 2012, despite the seasonally stronger birth rates in the dragon year. The Hong Kong government tightened this regulation further in mid 2012 and imposed a “zero delivery quota” policy for mainland women whose spouse are not Hong Kong resident from 2013 onwards. Fig 20: Birth rates in Hong Kong

Source: HK Census & Statistics Dept

91.3

40

50

60

70

80

90

100

110

CY

90

CY

91

CY

92

CY

93

CY

94

CY

95

CY

96

CY

97

CY

98

CY

99

CY

00

CY

01

CY

02

CY

03

CY

04

CY

05

CY

06

CY

07

CY

08

CY

09

CY

10

CY

11

CY

12

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5Live birth in Hong Kong ('k), LHS

TFR, RHS

Fig 21: Composition of live birth in Hong Kong

Source: HK Census & Statistics Dept

0102030405060708090

100110

CY

01

CY

02

CY

03

CY

04

CY

05

CY

06

CY

07

CY

08

CY

09

CY

10

CY

11

10%

20%

30%

40%

50%

60%Live birth due to Mainland women ('k)Live birth ex-Mainland woman ('k)% Mainland women

*Detailed breakdown of composition is not available for CY12.


11 of 21

Market share There is currently 5 private cord blood banking service providers in Hong Kong. Based on 2010 figures, Cordlife has a market share of 28% by deliveries in the year. Among these players, only the 3 largest players, Cryolife, Cordlife and Healthbaby have attained AABB accreditation. Fig 22: Market share of private cord blood banks by deliveries in 2010 (‘k)

Source: Cordlife, PSR (for CY2010)

Smart Cells &

Asia Pacific

Stem Cells,

0.2 , 4%

Cryolife, 1.2 ,

23%

Cordlife, 1.5 ,

28%

Healthbaby,

2.3 , 45%

Low fertility rate in core markets According to data from Central Intelligence Agency (CIA), Hong Kong and Singapore have among the lowest fertility rates in the world. However, these countries tend to have a higher level of wealth and disposable income, which we opine is a more important gauge of cord blood banking adoption levels. According to data from World Bank, Singapore has the highest level of healthcare expenditure per capita in the markets relevant to Cordlife. Fig 23: Fertility rate

Source: CIA

3.102.61 2.55

2.201.66 1.55

1.11 0.93 0.79

53 78 81 104 175 184 221 223 224

0.0

1.0

2.0

3.0

4.0

5.0

Philip

pine

s

Malay

sia

India

Indo

nesia

Thaila

nd

China

Hon

g Kon

g^

Mac

ao^

Singa

pore

Children Born per WomanRanking

*CIA’s measure of fertility rates could differ from national standards as a result of factors including data availability, assessment, and methods and protocols.

Fig 24: Healthcare exp. & GDP per capita, 2010 (US$)

Source: World Bank, PSR

77

368

54 77 179 221

1,5631,733

0

500

1,000

1,500

2,000

Philip

pine

s

Malay

sia

India

Indo

nesia

Thaila

nd

China

Hon

g Kon

g^

Mac

ao^

Singa

pore

01020304050607080Healthcare exp. per capita (US$), LHS

GDP per capita (US$'k), RHS

^Healthcare expenditure data for Hong Kong estimated from HK DOH & data for Macao not available.

Insurance penetration rate as a gauge We believe that cord blood banking is conceptually similar to life insurance policies. The “insured” pays a premium to receive a “payout” when a situation arose. However, there are two distinct differences. While insurance policies can be bought at anytime in a person’s life, the decision to adopt cord blood banking can only be made once in a person’s life (i.e. at birth). Hence, the decision to bank one’s cord blood is highly time sensitive. The second difference is that while the “payout” for insurance policies is money; the “payout” for cord blood banking is the opportunity to utilize one’s stem cell to save his/her life. Due to the conceptual similarity, we believe that one can use insurance penetration history as a guide to the potential for cord blood banking. As compared to a population of 5.3mn, 4.9mn lives were insured in Singapore at the end of 2012. The no. of lives insured as a proportion of population in Singapore trended higher over the years at a rate of 3.2% p.a. from 25% in 1991 to 92% in 2012. Hence, if the adoption of private cord blood banking takes a similar path as that of insurance penetration, there would be significant upside to the 24% market penetration rate for Singapore in 2010. Fig 25: Lives Insured vs Population in Singapore

Source: CEIC, PSR

0

1,000

2,000

3,000

4,000

5,000

6,000

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

0%

20%

40%

60%

80%

100%No. of Lives Insured ('k)

as % of Population


12 of 21

We believe that our target price of S$0.84 is conservative for the following reasons: 1) Market penetration assumed to stagnate from CY15E. As shown in the discussion of our modeling assumptions, we have conservatively assumed stagnant market penetration after CY15E (Singapore: 38%; Hong Kong: 21%) and prefer to leave further penetration beyond CY15E as an upside risk to our valuation of the stock. 2) Potential introduction of Umbilical Cord Tissue Banking in Singapore, yet to be built in. Currently, Cordlife only offers umbilical cord tissue banking services in Hong Kong. In Feb 2013, the company announced that it has entered into a strategic alliance agreement with CordLabs Asia to co-operate on providing similar services across various countries. With management currently exploring the possibility of introducing this service in Singapore, we believe that this could open up an additional revenue stream in the near future. However, until there is greater clarity on adoption of this new product, we prefer to leave this future revenue stream out of our model. 3) Conservative valuation of its stake in CCBC. We were conservative in using the market price of CCBC as our valuation inputs. Our valuation of Cordlife would have increased by S$0.10 to S$0.94, if we had used consensus target price of US$5.50 as our valuation input. Fig 26: Market Price of CCBC

Source: Bloomberg3.20

2.41

2.00

2.20

2.40

2.60

2.80

3.00

3.20

3.40

Ma

r-12

Ap

r-12

Ma

y-1

2

Ju

n-1

2

Ju

l-12

Au

g-1

2

Se

p-1

2

Oct-1

2

No

v-1

2

De

c-1

2

Ja

n-1

3

Fe

b-1

3

Ma

r-13

Ap

r-13

Ma

y-1

3

Ju

n-1

3

Stock Price (US$)

4) Potential acquisition of fast growing emerging assets from CBB not factored in. Cordlife has a Right of First Refusal (ROFR) for the acquisition of various operating assets in Philippines, Indonesia & India from CBB, should the company decide to divest. Acquisition of these entities would provide Cordlife with geographical diversification into emerging markets that have higher birth rates and lower market penetration. As observed from the recent results of CBB, the Philippines portfolio had turned profitable with its sales in 1HFY13 (A$1.3mn) almost matching that of FY12 (A$1.4mn). This implies that cash burn rate in the emerging markets could slow as its units start to turn profitable. So, what price to pay these assets? We believe that a reference point for these assets would be CBB’s market value of c.S$11.6mn (A$8.6mn based on market price of A$0.050), which could be fully funded with less than 2yrs of operating cashflow.

Fig 27: Revenue of emerging market in CBB (A$’mn)

Source: CBB

1.3 1.0 1.0 0.7

0.51.7

3.4

2.2

1.4

1.3

0.1

1.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

FY10 FY11 FY12 HY13

Philippines

India

Indonesia

Fig 28: Profits of emerging market in CBB (A$’mn)

Source: CBB

(0.7)

(1.5)(1.0)

(0.8)

(0.9)

(0.8)

(0.4)

(0.1)

(0.2)

0.3

(0.6)

(0.6)

(3.5)

(3.0)

(2.5)

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

FY10 FY11 FY12 HY13

Philippines

India

Indonesia

Fig 29: Market Price of CBB

Source: Bloomberg0.080

0.030

0.00

0.02

0.04

0.06

0.08

0.10

Ma

r-12

Ap

r-12

Ma

y-1

2

Ju

n-1

2

Ju

l-12

Au

g-1

2

Se

p-1

2

Oct-1

2

No

v-1

2

De

c-1

2

Ja

n-1

3

Fe

b-1

3

Ma

r-13

Ap

r-13

Ma

y-1

3

Ju

n-1

3

Market Price (A$)


13 of 21

Key Drivers: We expect the number of live births in Singapore to moderate in CY13E to 38.0k, as we build in moderation after the seasonally stronger dragon year of 42.6k live births in CY12. In line with the long term population growth of Singapore, live births are assumed to increase at 1% a year. We modeled higher penetration rates and a 62% market share for Cordlife over the next few years and assumed that penetration rate sustain at 38% in CY15E and beyond. For the Hong Kong market, we expect live births at private hospitals to decline to 20.0k in CY13E due to restrictions on deliveries by mainland women as explained earlier. Similar to Singapore, live births are assumed to increase at 1% a year. We modeled a 28% market share and higher penetration rates over the next few years to a sustained level of 21% in CY15E and beyond. Our assumptions on the market penetration in Singapore and Hong Kong are in line with the market research report in Cordlife’s IPO prospectus by Deloitte & Touche Financial Advisory Services Limited. Fig 30: Key Model Assumptions

Key risks to our view:

Market Penetration - While market penetration is expected to deepen for Cordlife’s core markets of Singapore and Hong Kong, actual increase in penetration rate may slow or not take place.

Overpaying for emerging assets held by CBB - While acquisition of emerging assets held by CBB could provide growth beyond the matured markets, we believe that there is a risk of overpaying for them as it depends on the negotiation between the two parties.

Regulatory - We believe that a change in regulatory regimes would have a significant impact on the business of Cordlife. For example, recent measures by the Hong Kong government to ban mainland women, who are not spouses of Hong Kong residents, from delivering in the country have effectively shrunk the number of live births and market size for the cord blood banking players.

Model Build:

Key assumptions CY13E CY14E CY15E CY16E CY17E CY18E CY19E CY20E CY21E CY22E CY23E CY24E

Singapore

Live Birth ('k) 38.0 38.4 38.8 39.2 39.5 39.9 40.3 40.7 41.1 41.6 42.0 42.4

y-y (%) 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%

Penetration (%) 32.0% 35.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%

Cordblood bank deliveries ('k) 12.2 13.4 14.7 14.9 15.0 15.2 15.3 15.5 15.6 15.8 16.0 16.1

Cordlife Market share (%) 62% 62% 62% 62% 62% 62% 62% 62% 62% 62% 62% 62%

Hong Kong

Live Birth ('k) <Private hosp.> 20.0 20.2 20.4 20.6 20.8 21.0 21.2 21.4 21.7 21.9 22.1 22.3

y-y (%) 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%

Penetration (%) 16.9% 18.7% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0%

Cordblood bank deliveries ('k) 3.4 3.8 4.3 4.3 4.4 4.4 4.5 4.5 4.5 4.6 4.6 4.7

Cordlife Market share (%) 28% 28% 28% 28% 28% 28% 28% 28% 28% 28% 28% 28%

Key model inputs FY13E FY14E FY15E FY16E FY17E FY18E FY19E FY20E FY21E FY22E FY23E FY24E

Client delivery ('k) 8.4 8.9 9.9 10.4 10.5 10.6 10.7 10.8 10.9 11.0 11.1 11.2

Units stored ('k) 49.3 58.2 68.1 78.5 89.0 99.6 110.3 121.1 132.0 143.0 154.1 165.4

Utilisation (%) 6.9% 8.2% 9.6% 11.1% 12.5% 14.0% 15.5% 17.1% 18.6% 20.1% 21.7% 23.3%

Revenue (S$'mn) 33.8 36.8 41.2 44.4 46.2 48.1 50.0 51.9 53.8 55.8 57.7 59.7

y-y (%) 17.6% 8.9% 11.8% 7.7% 4.2% 4.0% 3.9% 3.8% 3.7% 3.6% 3.5% 3.4%

Gross Margin (%) 70.0% 70.5% 71.0% 71.0% 71.0% 71.0% 71.0% 71.0% 71.0% 71.0% 71.0% 71.0%

Gross Profit (S$'mn) 23.7 26.0 29.3 31.5 32.8 34.1 35.5 36.8 38.2 39.6 41.0 42.4

FCF (S$'mn) 7.9 9.6 9.6 10.2 10.6 11.2 11.7 12.3 12.8 13.4 13.9

Terminal Value (S$'mn) 169.3

WACC (%) 9.0%

Terminal g (%) 1.0%

Discounted FCF (S$'mn) 7.5 8.4 7.7 7.5 7.2 7.0 6.7 6.4 6.2 80.6

Sum of Discounted FCF (S$'mn) 145.3

Source: PSR est.


14 of 21

Scenarios Bullish view - Dreaming of the upside… What if cord blood banking continues to gain popularity? As with every trend, there are always tipping points that could result in mass adoption. For example, during initial introduction of mobile phones, not many would have imagined a market penetration of >100% in Singapore. In crafting our bullish view on the stock, we assumed that market penetration would continue to deepen over the next decade and sustain at 60% in Singapore and 40% in Hong Kong by 2022. We also used consensus TP of US$5.50/shr to value Cordlife’s stake in China Cord Blood. This valuation method would drive a target price of S$1.12. Fig 31: Bullish Valuation presents significant upside Fig 32: Bearish Valuation close to current market price

Bearish view- What if the forecasted penetration did not materialize? We should also exercise caution and think about the downside. In this scenario, we assume that all the bullish views about increasing market penetration did not materialize and penetration levels stays at that of CY10 (Singapore: 24.0%; Hong Kong 11.5%). We have also used the 1 year low of China Cord Blood of US$2.41/shr in this valuation model. This would lead to a valuation that is close to the current market price of S$0.64.


(Bullish view) S$'mn S$


Stake in China Cord Blood Corp. 50.3 19% 0.22 Consensus TP (US$5.50/shr)



Add: Cash 10.1 4% 0.04

Less: Debt (5.5) -2% (0.02)

Equity Value 260.0 100% 1.12




F12M DPS (S$) 0.025

Price upside (%) 73.6%



Source: PSR est.


(Bearish view) S$'mn S$


Stake in China Cord Blood Corp. 22.0 15% 0.09 Lowest price in 1yr (US$2.41/shr)



Add: Cash 12.9 9% 0.06

Less: Debt (5.5) -4% (0.02)

Equity Value 149.9 100% 0.64




F12M DPS (S$) 0.025

Price upside (%) -0.8%



Source: PSR est.


15 of 21

FYE June FY11 FY12 FY13F FY14F FY15F

Valuation Ratios

P/E (X), adj. 17.7 17.0 16.0 15.0 13.3

P/B (X) n.m. 2.1 2.0 1.9 1.7

EV/EBITDA (X), adj. 16.2 17.6 15.0 13.4 11.5

Dividend Yield (%) n.m. 5.9% 3.9% 4.2% 4.7%

Per share data (SGD)

EPS, reported n.m. 0.030 0.052 0.043 0.048

EPS, adj. 0.036 0.038 0.040 0.043 0.048

DPS n.m. 0.038 0.025 0.027 0.030

BVPS n.m. 0.306 0.330 0.348 0.369

Growth & Margins (%)

Growth

Revenue -8.8% 12.1% 17.6% 8.9% 11.8%

EBITDA -9.5% -7.7% 17.0% 11.9% 16.9%

EBIT -11.5% -9.4% 15.1% 12.0% 19.3%

Net Income, adj. 2.5% 4.2% 6.5% 6.2% 13.0%

Margins

EBITDA margin 34.3% 28.2% 28.1% 28.8% 30.2%

EBIT margin 32.0% 25.8% 25.3% 26.0% 27.8%

Net Profit Margin 33.0% 24.1% 35.7% 27.1% 27.4%

Key Ratios

ROE (%) 23.0% 12.4% 16.3% 12.7% 13.5%

ROA (%) 14.8% 9.5% 12.5% 9.4% 10.0%

Net Debt/(Cash) (3) (10) (3) (5) (8)

Net Gearing (X) Net Cash Net Cash Net Cash Net Cash Net Cash

Income Statement (SGD mn)

Revenue 25.7 28.8 33.8 36.8 41.2

EBITDA 8.8 8.1 9.5 10.6 12.4

Depreciation & Amortisation (0.6) (0.7) (0.9) (1.0) (1.0)

EBIT 8.2 7.4 8.6 9.6 11.4

Net Finance (Expense)/Income 0.0 0.2 0.5 0.4 0.1

Other items 0.0 (1.9) 2.7 0.0 0.0

Associates & JVs 1.7 2.1 2.0 2.0 2.1

Profit Before Tax 9.9 7.8 13.7 12.0 13.6

Taxation (1.5) (0.9) (1.6) (2.0) (2.3)

Profit After Tax 8.5 6.9 12.1 10.0 11.3

Non-controlling Interest 0.0 0.0 0.0 0.0 0.0

Net Income, reported 8.5 6.9 12.1 10.0 11.3

Net Income, adj. 8.5 8.8 9.4 10.0 11.3

Source: PSR


16 of 21

FYE June FY11 FY12 FY13F FY14F FY15F

Balance Sheet (SGD mn)

PPE 4.3 6.1 10.1 9.6 9.4

Intangibles 0.0 0.0 0.0 0.0 0.0

Associates & JVs 15.1 17.7 27.4 29.4 31.5

Investments 0.2 13.2 13.6 13.9 11.7

Others 22.9 24.3 26.0 28.3 31.6

Total non-current assets 42.5 61.2 77.1 81.3 84.2

Inventories 0.2 0.4 0.4 0.4 0.4

Accounts Receivables 7.1 9.2 10.0 10.9 12.2

Investments 1.3 6.0 6.0 6.0 6.0

Cash 4.0 12.9 8.5 10.1 14.0

Others 0.3 0.5 0.5 0.5 0.5

Total current assets 12.9 29.1 25.5 27.9 33.1

Total Assets 55.4 90.4 102.6 109.2 117.4

Short term loans 0.1 0.1 0.2 0.2 0.2

Accounts Payables 4.3 3.9 5.5 5.9 6.5

Others 3.7 4.3 4.3 4.3 4.3

Total current liabilities 8.0 8.3 9.9 10.4 10.9

Long term loans 0.8 2.5 5.3 5.3 5.3

Others 6.0 8.5 10.7 12.6 15.2

Total non-current liabilities 6.8 10.9 16.0 17.9 20.5

Non-controlling interest 0.0 0.0 0.0 0.0 0.0

Shareholder Equity 40.6 71.2 76.7 80.9 85.9

Cashflow Statements (SGD mn)

CFO

PBT 9.9 7.8 13.7 12.0 13.6

Adjustments (1.2) 0.5 (4.2) (1.4) (1.2)

Cash from ops before WC changes 8.7 8.3 9.5 10.6 12.4

WC changes 0.6 (0.6) 1.3 (0.8) (1.4)

Cash generated from ops 9.4 7.7 10.8 9.8 11.0

Taxes paid, net (1.4) (1.7) (1.6) (2.0) (2.3)

Interest paid (0.0) (0.0) (0.1) (0.2) (0.2)

Cashflow from ops 7.9 6.0 9.0 7.6 8.5

CFI

CAPEX, net (3.1) (2.4) (5.0) (0.5) (0.8)

Dividends from associates & JVs 0.0 0.0 0.0 0.0 0.0

Dividends/Interest from Investments 0.1 0.1 0.3 0.3 0.3

Purchase/sale of investments (1.3) (17.7) (0.0) (0.0) 2.2

Investments in subs & associates 0.0 0.0 (5.1) 0.0 0.0

Others 0.0 0.0 0.0 0.0 0.0

Cashflow from investments (4.3) (20.0) (9.9) (0.3) 1.7

CFF

Share issuance 0.0 26.0 0.0 0.0 0.0

Purchase of treasury shares 0.0 0.0 0.0 0.0 0.0

Loans, net of repayments 0.8 1.7 2.9 0.0 0.0

Dividends to minority interests 0.0 0.0 0.0 0.0 0.0

Dividends to shareholders & capital reduction 0.0 (4.7) (6.5) (5.8) (6.3)

Others (8.1) 0.0 0.0 0.0 0.0

Cashflow from financing (7.3) 23.0 (3.6) (5.8) (6.3)

Net change in cash (3.6) 9.0 (4.4) 1.5 3.9

Effects of exchange rates 0.3 (0.0) 0.0 0.0 0.0

CCE, end 4.0 12.9 8.5 10.1 14.0

Source: PSR


17 of 21

Total Returns Recommendation Rating

> +20% Buy 1

+5% to +20% Accumulate 2

-5% to +5% Neutral 3

-5% to -20% Reduce 4

<-20% Sell 5

We do not base our recommendations entirely on the above quantitative return bands.

We consider qualitative factors like (but not limited to) a stock's risk rew ard profile, market

sentiment, recent rate of share price appreciation, presence or absence of stock price

catalysts, and speculative undertones surrounding the stock, before making our f inal

recommendation

Ratings History

PSR Rating System

Remarks

12345


0.40

0.50

0.60

0.70

0.80

0.90

Mar-1

2

Jun-1

2

Sep-1

2

Dec-1

2

Mar-1

3

Jun-1

3

Market PriceTarget Price


18 of 21

Important Information

This publication is prepared by Phillip Securities Research Pte Ltd., 250 North Bridge Road, #06-00, Raffles City Tower, Singapore 179101 (Registration Number: 198803136N), which is regulated by the Monetary Authority of Singapore (“Phillip Securities Research”). By receiving or reading this publication, you agree to be bound by the terms and limitations set out below. This publication has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this document by mistake, please delete or destroy it, and notify the sender immediately. Phillip Securities Research shall not be liable for any direct or consequential loss arising from any use of material contained in this publication. The information contained in this publication has been obtained from public sources, which Phillip Securities Research has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this publication are based on such information and are expressions of belief of the individual author or the indicated source (as applicable) only. Phillip Securities Research has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete, appropriate or verified or should be relied upon as such. Any such information or Research contained in this publication is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the preparation or issuance of this report, (i) be liable in any manner whatsoever for any consequences (including but not limited to any special, direct, indirect, incidental or consequential losses, loss of profits and damages) of any reliance or usage of this publication or (ii) accept any legal responsibility from any person who receives this publication, even if it has been advised of the possibility of such damages. You must make the final investment decision and accept all responsibility for your investment decision, including, but not limited to your reliance on the information, data and/or other materials presented in this publication. Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this material are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this publication is not indicative of future results. This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This publication should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this publication has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this material is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this publication involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks. Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this research should take into account existing public information, including any registered prospectus in respect of such product.

Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this publication, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the


19 of 21

preparation or issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this publication.

Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment. To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold a interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this publication. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, which is not reflected in this material, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the preparation or issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the preparation or issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this material. The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction. Section 27 of the Financial Advisers Act (Cap. 110) of Singapore and the MAS Notice on Recommendations on Investment Products (FAA-N01) do not apply in respect of this publication. This material is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this material may not be suitable for all investors and a person receiving or reading this material should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products. Please contact Phillip Securities Research at [65 65311240] in respect of any matters arising from, or in connection with, this document. This report is only for the purpose of distribution in Singapore.


20 of 21

Contact Information (Singapore Research Team)

Chan Wai Chee Joshua Tan Derrick Heng CEO, Research Head of Research Deputy Head of Research

Special Opportunities Global Macro, Asset Strategy SG Equity Strategist &

Transport +65 6531 1231 +65 6531 1249 +65 6531 1221

[email protected] [email protected] [email protected]

Go Choon Koay, Bryan Ken Ang Ng Weiwen Investment Analyst Investment Analyst Macro Analyst

Property Financials, Telecoms Global Macro, Asset Strategy +65 6531 1792 +65 6531 1793 +65 6531 1735

[email protected] [email protected] [email protected]

Roy Chen Nicholas Ong Research Assistant Macro Analyst Investment Analyst General Enquiries

Global Macro, Asset Strategy Commodities, Offshore & Marine +65 6531 1240 (Phone) +65 6531 1535 +65 6531 5440 [email protected]

[email protected] [email protected]

mailto:[email protected]

../../../Documents%20and%20Settings/peterlee/research/AppData/Local/Microsoft/Windows/Documents%20and%20Settings/roychencz/Application%20Data/Microsoft/Local%20Settings/Temporary%20Internet%20Files/OLK89/TH%20Rpt/Stocks/Word/2012/[email protected]


21 of 21

Contact Information (Regional Member Companies)

SINGAPORE

Phillip Securities Pte Ltd Raffles City Tower

250, North Bridge Road #06-00 Singapore 179101 Tel +65 6533 6001 Fax +65 6535 6631

Website: www.poems.com.sg

MALAYSIA

Phillip Capital Management Sdn Bhd B-3-6 Block B Level 3 Megan Avenue II, No. 12, Jalan Yap Kwan Seng, 50450

Kuala Lumpur Tel +603 2162 8841 Fax +603 2166 5099

Website: www.poems.com.my

HONG KONG

Phillip Securities (HK) Ltd Exchange Participant of the Stock Exchange of Hong Kong

11/F United Centre 95 Queensway Hong Kong

Tel +852 2277 6600 Fax +852 2868 5307

Websites: www.phillip.com.hk

JAPAN

Phillip Securities Japan, Ltd. 4-2 Nihonbashi Kabuto-cho Chuo-ku,

Tokyo 103-0026 Tel +81-3 3666 2101 Fax +81-3 3666 6090

Website:www.phillip.co.jp

INDONESIA

PT Phillip Securities Indonesia ANZ Tower Level 23B,

Jl Jend Sudirman Kav 33A Jakarta 10220 – Indonesia

Tel +62-21 5790 0800 Fax +62-21 5790 0809

Website: www.phillip.co.id

CHINA

Phillip Financial Advisory (Shanghai) Co. Ltd No 550 Yan An East Road,

Ocean Tower Unit 2318, Postal code 200001

Tel +86-21 5169 9200 Fax +86-21 6351 2940

Website: www.phillip.com.cn

THAILAND

Phillip Securities (Thailand) Public Co. Ltd 15th Floor, Vorawat Building,

849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel +66-2 6351700 / 22680999 Fax +66-2 22680921

Website www.phillip.co.th

FRANCE

King & Shaxson Capital Limited 3rd Floor, 35 Rue de la Bienfaisance 75008

Paris France Tel +33-1 45633100 Fax +33-1 45636017

Website: www.kingandshaxson.com

UNITED KINGDOM

King & Shaxson Capital Limited 6th Floor, Candlewick House,

120 Cannon Street, London, EC4N 6AS

Tel +44-20 7426 5950 Fax +44-20 7626 1757

Website: www.kingandshaxson.com

UNITED STATES

Phillip Futures Inc 141 W Jackson Blvd Ste 3050

The Chicago Board of Trade Building Chicago, IL 60604 USA

Tel +1-312 356 9000 Fax +1-312 356 9005

AUSTRALIA PhillipCapital

Level 12, 15 William Street, Melbourne, Victoria 3000, Australia

Tel +61-03 9629 8288 Fax +61-03 9629 8882

Website: www.phillipcapital.com.au

http://www.poems.com.sg/

http://www.poems.com.my/

http://www.phillip.com.hk/

http://www.phillip.co.id/

../../../Documents%20and%20Settings/peterlee/research/AppData/Local/Microsoft/Windows/Documents%20and%20Settings/roychencz/Application%20Data/Report_Admin/SG%20Rpt/Stocks/Local%20Settings/Temporary%20Internet%20Files/OLK83/www.phillip.com.cn

http://www.phillip.co.th/

http://www.kingandshaxson.com/

http://www.kingandshaxson.com/

http://www.phillipcapital.com.au/