It will take time for the retailer to reap the benefits of its revamp plan to improve sales.
For its second quarter ended Nov 30 2014, its posted revenue and net profit for the quarter improved 5.4% and 14.8% from a year ago, for the cumulative six months to Nov 30 net profit shrank 63.4% to rm2.64 million compared with the previous year.
Caring’s revenue expanded 5.8% to rm177.4 million for the six months due to improved contributions from its new outlets.
The sharp decline in earnings to the increasingly intense price war between pharmacies such as Watson and Guardian.
The group financial statements show that a large chunk of its expenses stemmed from selling and distribution which contributed 18.5% of it revenue in 2QFY2015 and 16.8% in 1QFY2015. This could mean that the current (Jan 2015) promotional and marketing activities are not brining the desired results given its weak performance.
Furthermore, net margins appear to be slim for the group – 0.9% and 2.4% for its 1QFY2015 and 2QFY2015.
Silver lining for Caring could be the drug dispensing policy to separate prescription and dispensing of medicine. The policy of introduced may allow Caring’s pharmacies stationed at its outlets to dispense medicine to patients thereby raising the group’s revenue.
However it is said to be introduced in the next three to five years from now (Jan 2015).
For now only time will tell whether Carign can weather the tough operating conditions to ensure its outlets remain financially sustainable on the back of management’s proposals to revamp its marketing strategies.
Caring Pharmacy Group Bhd is offering for sale 35 million new shares at RM1.25 each to raise RM43.75m as it seeks a listing on the Main Market of Bursa Malaysia Securities.
It is offering 10.88 million new shares to the public while 5.71 million would be offered to eligible directors and employees, another 4.2 million shares offered to approved Bumiputera investors.
The pharmacy chain operator said that the remaining 14.198 million shares could be placed out.
The RM43.75mil, 41% of the proceeds would be used for new pharmacy outlets while 26.76% would be used for working capital.
The proceeds will goes towards increasing the number of the chain’s pharmacies across Penang Malaysia as well as working capital and renovation of the group’s head office and warehouse.
On its dividend policy, shareholders can expect dividends of not less than 30% of its annual profit.
The pharmacy is ranked amongst the top three community pharmacy operators in Malaysia with an estimated market share of 4% based on the number of community pharmacy outlets.
Based on its IPO price and enlarged issued and paid-up share capital of 217.7 million shares, its total market capitalisation is about RM272.133mil.The IPO price of RM1.25 per share represents a premium of 172% to the pro forma consolidated NA per share, and price to book ratio of about 2.72 times.
Based on its profit after tax and minority interest of RM20.55mil for 2013 and its enlarged issued and paid-up share capital of 217.7 million shares upon listing, its net price-to-earnings stood at 13.24 times.
Currently (Oct 2013), Motivasi Optima owns a 60% stake in Caring and BJCorp founder Tan Sri Vincent Tan holds a 20.35% stake.
Disclaimer:
Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.