Rodman and Renshaw on CCBC 7/25/2011
TERMINATION OF COVERAGE Effective immediately, we are terminating coverage of China Cord Blood Corp (CCBC) to better distribute resources throughout our coverage universe. Our last rating for CCBC was a Market Outperform / Speculative Risk rating, and should no longer be viewed as a recommendation to buy the stock. At F4Q11, CCBC had approximately $93MM in cash.
CCBC is a leading company in the umbilical cord blood banking industry in China, a sector which is tightly regulated by the government. The government has been following a “one license per region policy” and has currently granted a total of seven licenses countrywide. The application process is long and expensive, taking approximately 6-8 years and approximately $20 MM before approval. CCBC is the only cord blood banking operator that owns more than one license. CCBC has established a significant first-mover advantage by being one of the earliest players in the space, and this advantage has led to rapidly growing sales driven by an experienced sales force strategically located within an established and growing network of approximately 90 major hospitals in Beijing and 120 in Guangdong, the two regions in which the company currently has exclusive licenses. Guangdong has the largest regional population in China with approximately 1.1 MM new born babies every year. Currently China Cord Blood has approximately a 4% penetration rate in Guangdong province. Beijing has approximately 0.14 MM new born babies each year where CBCC has approximately a 20% penetration rate.
CCBC has recently acquired the third license to conduct cord blood banking in the Zhejiang Province. CCBC is on track to build out the facility in 2011 with the potential for material revenue contributions in 2012. Additionally, CCBC owns 19.92% equity stake in Shandong Cord Blood Bank (SCBB), the sole licensee for the Shandong province, and 19.1% equity stake in Cord Life Limited, a multi-national cord blood bank in Asia.
The CCBC business model is straightforward. CCBC signs an 18-year contract with expectant parents, and charges them a one-time initiation fee for processing the umbilical cord blood, and an additional storage fee per year for the 18 years of the life of the contract. The current governmental policy of “one-child-per-family” in China provides an unintended benefit to the cord blood banking industry, since additional value is placed on the health and well-being of each family’s offspring.
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Notice Regarding Privacy and Confidentiality:
This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.
Rodman & Renshaw, LLC may make a market in the securities being discussed.
Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).
Member SIPC.
Member FINRA.
