Caring Pharmacy IPO Target Price

Kenanga give Caring Pharmacy fair value at RM1.55 based on 13x CY14 EPS of 11.9 sen. They expect Caring to register net profit of RM23.8m and RM27.4m in FY14 and FY15, respectively. They conservatively forecast a 17% revenue growth each in FY14 and FY15, which is conservatively lower than the past three years average of 20% on the back of same-store-sales growth and opening of new outlets. They have factored in marginally lower margins taking into account higher advertising and promotion activities in an effort to increase or sustain its market share in our forecasts. Based on their earnings estimate and a 30% dividend payout assumption, they expect FY14 and FY15 net Dividend Per Share of 3.3 sen and 3.8 sen respectively, translating to an average Caring Pharmacy dividend yield of 3%.

Their fair value is RM1.55 is based on 13x CY14 EPS of 11.9 sen. The Caring Pharmacy PE ratio of 13x multiple is at 22% and 30% discount to Berjaya Food’s 1-year forward PER of 17.0x and Berjaya  Retail’s 18.5x PER valuation, respectively, when it was taken private.

Caring Pharmacy Group Bhd IPO

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.

According to its prospectus issued on Friday, 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.

Caring Pharmacy said of the RM43.75mil, 41% of the proceeds would be used for new pharmacy outlets while 26.76% would be used for working capital.

On its dividend policy,  the company said shareholders can expect dividends of not less than 30% of its annual profit.

Caring Pharmacy managing director Chong Yeow Siang said 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.

“We are encouraged by the overwhelming response that we received from investors and fund managers for our shares offered through the private placement where the book has been covered multiple times,” he said.

Caring Pharmacy said 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.

It noted 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”.

Caring Pharmacy said 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.

The pharmacy chain is expected to list its shares on Nov 13.

Kenanga Investment Bank Bhd is the principal adviser, managing underwriter, joint underwriter together with MIDF Amanah Investment Bank Bhd and joint placement agent together with Inter-Pacific Securities Sdn Bhd for the IPO.

Motivasi Optima Sdn Bhd and Jitumaju Sdn Bhd are the promoters of the IPO.


Listing Detail:
Listing Sought: Main Market
Issue Price: RM 1.25
Par Value: RM 1.00

Dates:
Offer Period Open: 18-10-13
Offer Period Close: 30-10-13
Tentative listing date:  13-11-13
Number of shares:
Public Issue: 35,000,000
Stock Code: CARING