KUALA LUMPUR: It is estimated that Caring Pharmacy Group Bhd’s IPO will raise total gross proceeds of RM43.75 million, which will go towards increasing the number of the chain’s pharmacies across Peninsular Malaysia as well as working capital and renovation of the group’s head office and warehouse.
In its prospectus released last Friday, Caring said about 41.15% of the proceeds will, among other things, go towards setting up between 25 and 30 new community pharmacies within two years.
“Our new community pharmacies will mainly be set up in urban areas, as we believe there are still growth prospects in these areas. We are still evaluating our expansion plan and will obtain the best outlet location when the opportunity arises,” it said.
In addition, the group will use internally generated funds to set up a further five to 10 community pharmacies.
Caring has also purchased a plot of land measuring about 33,778 sq ft in Petaling Jaya Old Town to serve as its new warehouse and head office. Construction is expected to be completed by 2014.
Caring also said that the RM11.75 million from the proceeds set aside for working capital will enhance the group’s cash flow in funding its daily operational activities.
“Our cash and cash equivalents will increase to about RM53.1 million after the listing,” it said. As at May 31, the group had RM40.39 million in cash and cash equivalents.
Applications for Caring’s IPO shares opened last Friday. The IPO involves the issue of 35 million new shares of RM1 each, of which 14.2 million will be placed out to selected investors, 10.88 million shares allocated for the Malaysian public, and the rest for bumiputera institutional and selected investors, eligible directors, employees and shareholders of Caring Group subsidiaries.
The shares are priced at RM1.25 apiece and the tentative listing date is Nov 13 this year. The estimated cost of the exercise is about RM4 million.
In its prospectus, Caring said one of the reasons for the IPO is to augment Caring’s reputation and to expand and grow its customer base.
“The fundraising through the IPO will allow our group to implement our business strategies for our group and allow us to expand our capabilities and capacity,” it said.
A local daily quoted the pharmacy operator as saying shareholders could expect not less than 30% of its earnings to be distributed as dividends.
For the 2013 financial year ended May 31 (FY13), Caring posted a profit after tax of RM22.32 million, and revenue of RM301.41 million. Net earnings per share were 9.44 sen and the group’s profit margin was 7.41%.
Between FY12 and FY13, Caring’s revenue grew by 21.4% and profit after tax by 11.2%.
Based on the IPO price and enlarged share capital of the group, Caring is expected to have a market capitalisation of RM272.13 million.
As at June 2013, Caring reported a total of 83 community pharmacies in Malaysia and was ranked among the top three community pharmacy operators.
Looking ahead, the group said due to its sustainable business performance, future plans to provide sustainable growth and the industry prospects, the outlook for Caring appears favourable.
According to an independent report by Vital Factor Consulting, some of the drivers for growth of the community pharmacy industry include non-traditional retail sales, socio-economic growth and a growing ageing population.
Caring was established in Malaysia in 1994 by five pharmacists who were classmates at Universiti Sains Malaysia.
Currently, Motivasi Optima owns a 60% stake in Caring and Berjaya Corp Bhd founder Tan Sri Vincent Tan holds a 20.35% stake via Jitumaju Sdn Bhd.
This article first appeared in The Edge Financial Daily, on October 21, 2013.