Cordlife’s bid for Global Cord Blood ‘strongly positive,’ analyst says

China yuan coins

Cordlife’s S$1.25 billion all-share bid for Global Cord Blood Corp. (GCB) is “strongly positive” as it marks the Singapore-listed company’s “great leap” into the mainland China market, Soochow CSSD Capital Markets, or SCCM, said in a recent research note.

Earlier this month, Cordlife said it made a non-binding proposal to take over New York Stock Exchange-listed GCB, in deal that would see the Singapore company issue 2.50 billion shares with a value of S$1.25 billion, based on an issue price of S$0.50 each. That would work out to US$7.50 per Global Cord Blood share, Cordlife added.

SCCM said the deal was still “highly accretive” to Cordlife’s earnings per share (EPS), despite the large new share issuance, as GCB is more profitable than Cordlife. It estimated around 30.8 percent accretion to Cordlife’s fiscal 2020 EPS if the deal is completed by the end of the year.

GCB posted last 12 months’ net income of S$58 million, about 15 times Cordlife’s forecast fiscal 2019 net income of S$3.8 million, SCCM said, adding the China company’s net profit margin was 29.1 percent, compared with Cordlife’s 5.1 percent.

“GCB has a very similar, cash-generative business model as CLGL, but at a around four times scale (in terms of revenues) as compared to CLGL given that it is the market leader in the largest market in the world,” the note said.

SCCM kept its Buy call with S$0.65 a share target price on Cordlife unchanged as the deal is still preliminary and subject to the approval of both companies’ shareholders.

GCB is China’s largest cord blood/lining bank, the note said.

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