Cordlife will pay A$5.5mln to acquire CBB’s cord blood and cord tissue banking businesses and assets in India, Phillippines, Hong Kong and Indonesia.

The acquisition is positive in that the average growth rate for the assets in the past (2007-2011) averaged between 35-38%, reflecting the growing demand from the rising wealth effects in the respective countries.

Cordlife had said during the IPO that they would also exercise the right to purchase these assets when they are likely to turn profitable in the near term hence we believe these assets should help to contribute to the group’s profit soon.

Notwithstanding the above, we note that Cordlife’s share price has risen a significant 84% since its IPO just 1 year ago and PE for the stock has risen to  21 versus only 11-12x then.

While growth prospects are likely to remain robust,its strong share price performance and high valuations suggest that investors should HOLD the stock now.

Source:Lim & Tan Sec.We are thus lowering our recommendation from BUY to HOLD.The total NTA of the assets to be acquired amounts to A$3.7mln, pricing its at 1.5x NTA. Cordlife currently trades at close to3x NTA.