Time & date: 10 am, 18 Oct 2013.Venue: NTU@One-North Executive Centre, 11, Slim Barracks Rise (off North Buona Vista Road)
AT THE point of its AGM a year ago, Cordlife Group had 1 service offering -- cord blood banking -- in 2 countries (Singapore and Hong Kong).
This time around, Cordlife has 3 service offerings -- the 2 new ones being umbilical cord tissue banking and metabolic screening. And it operates in 7 countries. (For more on metabolic screening, see recent press release)
In between the 2 AGMs, Cordlife stock price surged 121% to close at $1.215.
Deriving from just its Singapore and HK business, for the year ended 30 June 2013, revenue increased 14.6% year-on-year. Net profit after tax surged 94.7% to S$13.5 million.
Excluding one-off items, net profit grew 33.6% to S$11.8 million.
The owned premises averts rising rental cost Cordlife would otherwise have to pay elsewhere. And it has nine strata-titled units to rent out for extra income.
In other countries where it operates, Cordlife has long-term leases locked in for its facilities.
"When you have long-term average cost curve going downward, and you continue to do what you do at steady state, you will see margins widen naturally," said Cordlife CEO Jeremy Yee.
For FY13, Cordlife is paying 1-cent final dividend and has paid out a 1-cent interim dividend.
The Powerpoint materials used by Jeremy for a 15-minute presentation at the start of the AGM can be downloaded at the SGX website.
Our audio recording of his presentation is available below >>
Here are some highlights of the Q&A session during last Friday's AGM.
Q: What are the overseas ventures that can contribute to Cordlife's top and bottomline this year?
Jeremy Yee, CEO of Cordlife: From the IPO prospectus, you can see that Cordlife Group has the first right of refusal to buy the operating assets of Cordlife Ltd, which is an Australian company now renamed Life Corporation. We completed the acquisition of the entities on 28 June 2013, just before the end of our financial year.
Cordlife Indonesia started operations in 2007 while Cordlife India and Philippines, in 2009. You can check the historical topline figures of these operations as the Australian parent, Cordlife Ltd, is an Australian-listed company with stock code LFC. If you are conservative, you can just use last year's topline number and add it to our results.
Gross profit margin increased from 71% in FY2012 to 73% in FY2013. Profit margins are expected to expand progressively as Cordlife's operating leverage becomes evident, particularly stemming from its purchase of its own 60-year-lease premises in Yishun.
The owned premises averts rising rental cost Cordlife would otherwise have to pay elsewhere. And it has nine strata-titled units to rent out for extra income.
In other countries where it operates, Cordlife has long-term leases locked in for its facilities.
"When you have long-term average cost curve going downward, and you continue to do what you do at steady state, you will see margins widen naturally," said Cordlife CEO Jeremy Yee.
For FY13, Cordlife is paying 1-cent final dividend and has paid out a 1-cent interim dividend.
The Powerpoint materials used by Jeremy for a 15-minute presentation at the start of the AGM can be downloaded at the SGX website.
Our audio recording of his presentation is available below >>
Here are some highlights of the Q&A session during last Friday's AGM.
Q: What are the overseas ventures that can contribute to Cordlife's top and bottomline this year?
Jeremy Yee, CEO of Cordlife: From the IPO prospectus, you can see that Cordlife Group has the first right of refusal to buy the operating assets of Cordlife Ltd, which is an Australian company now renamed Life Corporation. We completed the acquisition of the entities on 28 June 2013, just before the end of our financial year.
Cordlife Indonesia started operations in 2007 while Cordlife India and Philippines, in 2009. You can check the historical topline figures of these operations as the Australian parent, Cordlife Ltd, is an Australian-listed company with stock code LFC. If you are conservative, you can just use last year's topline number and add it to our results.
Cordlife CEO Jeremy Yee speaking with some shareholders after last Friday's AGM. Photo by Leong Chan Teik
Q: As the company grows, will you raise your dividends?
Dr Ho Choon Hou, chairman and non-executive director: We don't have a fixed dividend policy. We have to take into account opportunities that we see, the cash required for growth and the cash we are holding for our patients. As a governance policy, we will not use cash that patients have paid upfront for our investments or dividends because that is cash that has not been earned by the company.
Q: I see an increasing trend of trade receivables which are more than 90 days and not impaired. I'd like to understand your policy on this.
Jeremy Yee: It's not correct to put it that way. We have 3 payment plans. First, an annual plan where the customer is contractually obligated to stay with the contract for 21 years. It's 18 years in Hong Kong. The customer pays $1,950 upfront and then $250 annually -- that is deemed as non-current AR (accounts receivable). In Singapore, most customers would pay through the Child Development Account. The likelihood of a customer not continuing to pay is almost zero.
Cordlife chairman Dr Ho Choon Hou. Photo: annual reportThe second plan is: pay one-time to cover 10 years in a row followed by $250 a year until age 21. And then there is a plan for customers to pay upfront for all 21 years.
Q: There is a jump in trade receivables from $24 million to $38 million -- is there a 50% jump in customers? Or has everybody decided to pay by instalment?
Jeremy Yee: The completion date for the acquisition of 3 entities from Life Corp was 28 June. Our profit & loss statement does not include the financial performance of the 3 entities but our balance sheet does which is why there is a jump in receivables.
Q: On the subject of cash balance, now I understand that it includes what has been paid in advance by customers. Can I suggest that in future, the cash balance be reported in a way to show the customers' advance payments?
Jeremy Yee: The accounting treatment for that is clear cut. Please refer to page 38 of the annual report. Under non-current assets, we have trade receivables of $38.7 million and under current assets, the trade receivables is $12.1 million. For customers who pay in advance, we have deferred revenue of $5.1 million (under current liabilities) and $19.5 million under non-current liabilities. The notes to the accounts explain what all these figures are about. (Deferred revenue refers to revenue received in advance for services to be rendered).
Q: Cordlife has done well in Thomson Medical Centre and Raffles Hospital. What about the other hospitals?
Dr Ho: I don't think we are barred from any hospital. There are certain hospitals with a stronger relationship with us and we service our patients throughout Singapore. Most of our touchpoints are with the mothers themselves, and they can choose which cord blood bank to go to.
Jeremy Yee: We had 7,700 new clients in Singapore last year, compared to 7,200 the year before, which shows that our penetration rate has gone up.
Q: What about Hong Kong, which has restricted mainland Chinese mothers from going to HK to deliver their children?
Jeremy Yee: It's not just us who have been affected but also pharmaceutical companies, milk companies, hospitals......For us, Hong Kong is more than just cord blood banking. It has always been our launch pad for businesses into Greater China. New products are coming out, give us time and we will show you what we will do with that entity.
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Dr Ho Choon Hou, chairman and non-executive director: We don't have a fixed dividend policy. We have to take into account opportunities that we see, the cash required for growth and the cash we are holding for our patients. As a governance policy, we will not use cash that patients have paid upfront for our investments or dividends because that is cash that has not been earned by the company.
Q: I see an increasing trend of trade receivables which are more than 90 days and not impaired. I'd like to understand your policy on this.
Jeremy Yee: It's not correct to put it that way. We have 3 payment plans. First, an annual plan where the customer is contractually obligated to stay with the contract for 21 years. It's 18 years in Hong Kong. The customer pays $1,950 upfront and then $250 annually -- that is deemed as non-current AR (accounts receivable). In Singapore, most customers would pay through the Child Development Account. The likelihood of a customer not continuing to pay is almost zero.
Cordlife chairman Dr Ho Choon Hou. Photo: annual reportThe second plan is: pay one-time to cover 10 years in a row followed by $250 a year until age 21. And then there is a plan for customers to pay upfront for all 21 years.Q: There is a jump in trade receivables from $24 million to $38 million -- is there a 50% jump in customers? Or has everybody decided to pay by instalment?
Jeremy Yee: The completion date for the acquisition of 3 entities from Life Corp was 28 June. Our profit & loss statement does not include the financial performance of the 3 entities but our balance sheet does which is why there is a jump in receivables.
Q: On the subject of cash balance, now I understand that it includes what has been paid in advance by customers. Can I suggest that in future, the cash balance be reported in a way to show the customers' advance payments?
Jeremy Yee: The accounting treatment for that is clear cut. Please refer to page 38 of the annual report. Under non-current assets, we have trade receivables of $38.7 million and under current assets, the trade receivables is $12.1 million. For customers who pay in advance, we have deferred revenue of $5.1 million (under current liabilities) and $19.5 million under non-current liabilities. The notes to the accounts explain what all these figures are about. (Deferred revenue refers to revenue received in advance for services to be rendered).
Q: Cordlife has done well in Thomson Medical Centre and Raffles Hospital. What about the other hospitals?
Dr Ho: I don't think we are barred from any hospital. There are certain hospitals with a stronger relationship with us and we service our patients throughout Singapore. Most of our touchpoints are with the mothers themselves, and they can choose which cord blood bank to go to.
Jeremy Yee: We had 7,700 new clients in Singapore last year, compared to 7,200 the year before, which shows that our penetration rate has gone up.
Q: What about Hong Kong, which has restricted mainland Chinese mothers from going to HK to deliver their children?
Jeremy Yee: It's not just us who have been affected but also pharmaceutical companies, milk companies, hospitals......For us, Hong Kong is more than just cord blood banking. It has always been our launch pad for businesses into Greater China. New products are coming out, give us time and we will show you what we will do with that entity.
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Comments
Song StoneCold: It is the market leader in Singapore with a market share of 62% and the market is still relatively untapped at only 25%. CAGR is expected to be 9-10% till 2015 and competition is weak with 2 other competitors - Stem Cord and a public cord blood bank. Most importantly, it has a recurring income as after you deposit with them they will continue to recognise revenue over the next 18 years.
October 24 at 7:57am via mobile · Like · 1
Ng Lip Hong: how do u account for taking in 10 years of upfront payment. deferred liabilities and why the receivables
October 24 at 7:57am · Like
Ng Lip Hong: Song StoneCold where in the financial statements show the recurring income or the upfront income
October 24 at 7:57am · Like
Song StoneCold: Well thats what i found "Revenue is recognised upon the completion of processing of cord blood units collected and subsequently at the completion of each year of storage. Once the processing of the cord blood unit is completed, based on existing costs information, approximately 88.0% of the total revenue is recognised. The remaining 12.0% is recognised in approximately equal portions at the completion of each year of storage."
October 24 at 8:03am via mobile · Like
Ng Lip Hong: so 10 year upfront payment is recognised in 88% of the revenue and each subsequent year is in the 12%?
October 24 at 8:04am · Like
Song StoneCold: Yes
October 24 at 8:06am via mobile · Like