KUALA LUMPUR: OSK Research said the outlook for StemLife is weak and expects the company to post a marginal loss in FY2010.

The research house said on Thursday, Sept 23 that for FY09, StemLife's revenue fell 14.5% while net profit plunged by nearly 100% even after excluding provisions.

"Using its 1HFY10 results as guidance, we expect StemLife to make a marginal net loss in FY10. We had expected StemLife's associate company in Thailand to help cushion the sluggish business in Malaysia, but the performance of this associate had also not been stable," it said.

The associate company performed well in FY09 but its contribution in 1HFY10 fell drastically from RM300,000 1HFY09 to only RM8,000.

OSK Research said it was ceasing coverage on StemLife after the end of the CBRS phase 2. StemLife's share price has retraced by as much as 90% since it made its Sell recommendation in its initiation report in 2007.

"We only upgraded the stock to Neutral in February this year as its share price had moved to a more reasonable level," it said.

In 1HFY10, StemLife's revenue rose 14.4% but it still reported a RM300,000 net loss. Although the net loss was an improvement from the RM700,00 loss recorded in 1HFY09, "we do not expect the business to see much improvement going forward as the industry remains very competitive and the rather slow market acceptance of stem cell banking in Malaysia".

Despite StemLife's sluggish sales and its present net loss, the company still has a very strong balance sheet due to its high free cash flow and low capex business. As at June 30, 2010, StemLife held RM43.2 million in cash, had no borrowings and had RM3 million in the short-term investment. Other balance sheet items were healthy.