Caring Pharmacy: Plans more stores

Caring Pharmacy Group Bhd, the third largest pharmacy chain in Malaysia by outlets with a 4% market share, aims to open more stores in suburban areas where competition is less intense, according to analysts.

It was targeting between 12 and 15 new outlets per year over the next two to five years from 99 currently, BIMB Securities Research said in a note to investors yesterday.

The group has already made inroads into Shah Alam, Ampang, Setapak, Segambut and others. Its stronghold remains in the Klang Valley, which makes up 75% of its total store count.

Caring Pharmacy currently has presence in urban middle class neighbourhoods such as Subang Jaya, Damansara, Mont Kiara and Bangsar.

The brokerage has a “neutral” call on Caring Pharmacy with a target price of RM2.26, based on a multiple of 18 times its forecast 2015 earnings per share of 14 sen. The stock last closed at RM2.20, up one sen, with 184,100 shares done. It has gained 11.68% for the year

The research outfit is projecting that Caring Pharmacy will post net earnings of RM234mil in its 2014 financial year (FY14) and RM27.3mil in FY15, led by its extended store network and organic growth in sales of pharmaceutical products.

Caring Pharmacy aims to be the only community pharmacy chain providing full-time registered pharmacists at all outlets. Its closest rivals, Guardian and Watson, only had pharmacists in selected outlets, the brokerage said.

In its latest quarter, Caring Pharmacy opened five new outlets, comprising two in shopping complexes, one high street store and two specialised retail outlets.

Of its 99 stores, only 32 are 100%-owned while the rest are under its “Caring Venture Scheme” – a joint-venture agreement which enlists pharmacists as branch managers to be part of Caring community pharmacies and become shareholders of the branch.

Caring Pharmacy’s sales of pharmaceutical products accounted for some 60% of its revenue, and the remaining 30% and 10% came from ethical medicine and over the counter drugs, respectively.

The research firm added that although the impending goods and services tax, which comes into effect next April, would soften demand, healthcare products generally enjoy inelastic demand, which means pharmacies should see minimal impact from the new tax regime.

Caring Pharmacy posted net profit of RM6.62mil in the 3Q ended Feb 28 and RM13.84mil in the nine-month period.

/theSTAR 20-06-2014

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