This article first appeared in The Edge Financial Daily on October 31, 2018

KUALA LUMPUR: Having crossed the half-billion ringgit mark in sales in the last fiscal year, Caring Pharmacy Group Bhd plans to spend RM6 million to RM8 million this year to add 12 to 15 outlets to its portfolio, mainly in second-tier cities outside the Klang Valley.

The group is targeting a double-digit growth in overall sales and a 5% same-store sales growth, according to its managing director (MD) Chong Yeow Siang.

Speaking to reporters after the group’s annual general meeting here yesterday, Chong said Caring Pharmacy’s store expansion this financial year ending May 31, 2019 (FY19) will be focused on second-tier cities with a less competitive retail landscape in terms of price point.

“We are on the right track [with our turnaround plan] and are achieving results. Moving forward, I should say the retail environment is still competitive. But with a lot of hard work, we are confident that we will continue to deliver results.

“Since our presence is strong in the Klang Valley and Johor Baru, our attention [now] is to add more stores in second-tier cities. Operating a single store [in a given city] is definitely not cost-effective, so we will continue focusing on adding outlets there, to about three to five,” Chong added.

Chong is referring to Kota Kinabalu in Sabah, Kota Bharu, Kelantan, and Kuantan, Pahang where Caring Pharmacy entered into in FY18, as well as cities in Kedah, Perlis, Terengganu and Sarawak.

“We are allocating RM6 million to RM8 million [in total for the new stores], which is not a big deal for us. We can definitely generate our internal funds to do this,” he said. This means it costs about RM500,000 to RM600,000 per new outlet, with a 24-month gestation period each, he said, adding the group will be banking on its existing mature stores to bring in sales for the meantime.

In FY18, the group opened nine new community pharmacies. During the first quarter ended Aug 31, 2018 (1QFY19), Caring Pharmacy said it set up three more high street outlets, boosting its total outlets to 118.

The group’s FY18 net profit surged 39% to RM23.32 million from RM16.79 million in FY17. Revenue rose 11% to RM508.27 million from RM459.96 million, supported by strong contributions from high street outlets and those situated within complexes aged over two years.

Yesterday, the group announced to Bursa Malaysia that its net profit for 1QFY19 jumped 26% to RM4.09 million from RM3.25 million a year ago, on stronger sales and a higher advertising and promotion income earned. Quarterly revenue grew 14% to RM142.94 million from RM125.25 million previously, contributed by higher sales from existing outlets, thanks to an aggressive and extensive promotional campaign.

Meanwhile, Chong dismissed market talks about a South Korea-based foreign equity firm buying into the company. “Of course, our substantial shareholders are always in talks with all potential strategic partners on how to enhance shareholder value, how to help our company and how to leverage on each other’s strengths,” he said. “But as long as there is no official announcement from the company (Caring Pharmacy), then it is definitely a rumour.”

Caring Pharmacy shares were not traded yesterday. The stock last finished at RM1.71 on Monday, with a market capitalisation of RM372.28 million.