KUALA LUMPUR (Sept 26): StemLife Bhd, a private umbilical cord blood (UCB) banking service provider, rose as much as 16.7% to breach its three-month high of 55 sen, after CIMB Investment Bank Research wrote a report on the stock.
At 10.54 am today, StemLife gained 5.5 sen or 11.5% to 53.5 sen. The seventh top gainer saw trades of some 7.1 million shares. It earlier hit a high of 56 sen.
InterPacific Securities’ remisier Sam Ng told theedgemalaysia.com that StemLife’s rise today could be due to the CIMB IB report issued Sept 25.
In the report, CIMB IB research analysts Saw Xiao Jun and Ivy Ng Lee Fang said the firm has a huge cash pile of RM66 million with no borrowings as at end-June 2014.
The pair believes the stock could be worth 58 sen to 92 sen per share, based on sum-of-parts valuation, thus offering investors a 26% to 100% upside.
“In the past five years, StemLife has generated free cash flow (operating cash flow less capital expenditure) totalling RM47 million, which represents 41% of its current market cap,” the analysts said.
The analysts explained that most of StemLife’s customers (86% in 2013) pay upfront for 21 years of UCB storage.
Saw and Ng pointed out the strong cash position could be utilised to upgrade its equipment and system to improve its service level.
Furthermore, the analysts said StemLife’s partnership with Singapore-based Cordlife may boost its reported earnings in the next few years and allow it to return the cash to shareholders.
However, InterPacific’s Ng today described the stock as saying: “The trading value of the stock today far exceeds its fundamental value in terms of net tangible asset (NTA).”
He pointed out StemLife’s NTA stood at 11 sen as at June 30, 2014.