Yes Joes Cordlife has been a fabulous winner. You have already answer the first question for me "None of my friends want to buy Cordlife at this level" I am not a good trader. If I have sold off all my Cordlife shares say at $1.20, I will also not buy at this level either. Where are the others who bought into Cordlife? I believe many of them already taken profit.
To decide the valuation of a stock these are some of the check lists I apply as my guard-lines:
1. Is the revenue & profit one-off or recurring profit.
2. Profit margin increasing or reducing.
3. Is the company business still growing
4. Is there any risk of competition
For Cordlife all the answers to above are positive. Trading at PE of above 20 maybe slightly over-price or fairly price but in one to five year's time it will become cheaper if the share price stay the same. An established company over the years will build up a strong recurring profit.
When applied to investing, it means that we should focus on what really matters, namely the economics of the businesses that we own shares in. If a company is doing all the right things to grow its business profitably, then the share price should reflect that over time.
I believe in building up a strong portfolio of ‘CORE STOCKS’. Although it is already fairly price, it has good growth potential. Its oversea acquisition is gradually taking shape, revenue is growing and good profit margin. Dividend of about 2 cents may not be very attractive but overtime as profit grow dividend will also increase.
If there are other more attractive stocks and when fund are needed for other more attractive stocks than that may be a good reason to cash out or reduce holding for another stock and hold another core stock.
"Why sell the goose that going to lay the golden eggs" What needed is patient and keep track of business growth. Everyone want to score muti-baggers but do not have the patient to see their stocks grow but sold off pre-maturely.
The key is not to sell off potential growth stocks at its early stage of growth which have the potential of becoming another GEM. The true is very few of us are willing to buy into stocks like Super Group, Osim, Raffles Hospital and Vicom at the present price and trading at much higher PE ratio.
Cordlife buying a S$11.5m (RM29.58m) / 19.92% stake in ACE Market-listed StemLife Berhad, a leading provider of cord blood banking services in Malaysia.
The consideration will be satisfied with the issuance of 8m new ordinary shares in Cordlife to StemLife’s Managing Director and Deputy MD at an issue price of $1.30 and cash payment of RM2.85m.
The acquisition is for 49.3m shares in StemLife at the agreed price of RM0.60 per share, a 62% premium above the company’s last close of RM0.37 per share as at 4 September 2013..
Implies 18x PE multiple based on FY12 earnings and 4.4x PB multiple.
