KUALA LUMPUR (March 11): Hong Leong IB Research has maintained its “Sell” rating on Caring Pharmacy Group Bhd at RM1.20 with a lower target price of 87 sen (from RM1) and said from its recent company visit, it came away feeling negative on Caring’s near to medium term prospects and expects downside risks on its expansion plan and profit margin.

In a note Wednesday, the research house said Caring’s earnings for the next quarter could be slightly better than first two quarters as 3Q has traditionally been the strongest quarter for the group.

HLIB said Caring’s target to achieve 120 outlets by 2016 was intact, adding that it would focus more on primary cities that are less saturated than Klang Valley area.

“Gestation period for new outlets has increased from the usual average of 12-18 months to 18-24 months.

“FY15, FY16 and FY17 EPS trimmed by 18% - 20% to reflect lower profit margin and higher operating expenses.

“Maintain Sell with lower target price of 87 sen based on the updated PE multiple of 16.6x CY16 EPS, which is 2x discount to the average of other domestic market-oriented retail pharmacy chain operators in the region,” it said.