KUALA LUMPUR (Oct 30): Hong Leong IB Research (HLIB) has downgraded Caring Pharmacy Group Bhd to Sell (from Hold) and slashed its target price to RM1.20 (from RM1.94) and said the company’s 1QFY15 core net profit of RM0.6 million came in way below expectations, accounting for 2.4% of house and consensus full year estimates.
In a note Thursday, the research house said the deviations were due to lower profit margins dragged by selling and distribution expenses as well as slower-than-expected outlet expansion growth.
It said expansion slowed down with only 2 new outlets this quarter (4Q14: 7 new outlets), sdding that to date, there were a total 101 outlets.
“Due to the continuous disappointment in delivering earnings, we downgrade from Hold to Sell with a lower fair value of RM1.20 (-38% from RM1.94).
“This is derived based on a lower multiple of 15.5x CY15 EPS, 2x discount to the average of other domestic market-oriented retail pharmacy chain operators in the region,” it said.