Dragon Capital's aggressive stock acquisition of FPT Retail (FRT) over the past year is likely aimed at the Long Châu pharmacy chain, the main growth driver of FPT Retail.

 

The stock recently surged to a new all-time high of VNĐ125,000 per share, nearly doubling in value within a year. Dragon Capital, the largest foreign fund in the market with over US$4 billion in assets under management, invested in FPT Retail in 2017, before its listing.

 

After FRT went public, Dragon Capital reduced its ownership, but increased it again in late November 2022 to become a major shareholder. By mid-December 2023, Dragon Capital held over 11 per cent ownership in FPT Retail but subsequently sold off some shares.

 

Currently, the fund holds a total of 14.89 million FRT shares (10.93 per cent stake) and is the second-largest shareholder. Based on the current market price, Dragon Capital's investment in FPT Retail is valued at nearly VNĐ1.9 trillion.

 

The timing of Dragon Capital's aggressive acquisition coincided with a challenging period for the ICT retail sector, with weakened purchasing power. In 2023, FPT Retail reported losses in three out of four quarters, resulting in a full-year pre-tax loss of VNĐ294 billion. This was the first year the retail company recorded losses since its listing.

 

The losses in the fourth quarter were primarily due to expenses such as business efficiency bonuses, costs of disposing of near-date products, and inefficient operation costs of 36 FPT Shop stores. FPT Retail also reported a decrease of 31 FPT Shop stores compared to the beginning of 2023, leaving a total of 755 stores by the end of the year.

 

It is highly likely that Dragon Capital's target is Long Châu, the main growth driver of FPT Retail. In the last quarter of 2023, the revenue of the pharmacy chain increased by about 60 per cent to nearly VNĐ5 trillion, while FPT Shop's revenue decreased by 27 per cent compared to the same period in 2022.

 

In 2023, FPT Retail expanded the Long Châu chain with 560 new stores, bringing the total number of pharmacies to 1,497. This makes Long Châu the largest pharmacy chain in Việt Nam. The average monthly revenue per pharmacy remained at VNĐ1.1 billion in 2023, and the new stores took only about six months to break even.

 

KBSV's report evaluates Long Châu as having significant growth potential, with a profitable and continuously expanding chain while its competitors face their own issues. In the long term, Long Châu aims to delve deeper into the healthcare ecosystem with a much larger scale.

 

Similarly, SSI Research believes that a larger scale will contribute to Long Châu's long-term profit margins. With lower borrowing costs, FPT Retail can accelerate the expansion of the Long Châu chain to gain market share, considering that competitors such as An Khang and Pharmacity are still struggling with their business models. — VNS