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Stock Commentary

RRHI opens 900th Southstar Drug branch as part of “strategic expansion” push

Merkado Barkada
RRHI opens 900th Southstar Drug branch as part of âstrategic expansionâ push

The Go Family’s retail unit announced the opening of its 900th drugstore branch, between the combined locations of its Southstar Drug and Rose Pharmacy brands. The lastest location to be opened was in Sta. Cruz, Laguna, as part of RRHI’s “strategic expansion” into Luzon’s “underpenetrated areas” (nice).

Robinsons Retail Holdings [RRHI 56.90 2.98%] also operates TGP, the largest generic pharmacy chain in the Philippines, with over 2,000 locations.

RRHI said that it would continue with new store openings in 2022, as part of its plan to address the “rising health concerns among our customers”.

MB BOTTOM-LINE

I think the lack of a pure-play pharmacy stock on the PSE has caused the massive push into pharmacy and pharmacy-adjacent assets (like clinics) to go a little under-reported. 

SM Prime Holdings [SMPH 34.85 3.87%] owns Watsons Pharmacy with over 800 locations, Ayala Corp [AC 860.00 3.24%took over Generika in 2019, RRHI bought 100% of Rose Pharmacy for P4.5 billion in October of 2020, MerryMart [MM 2.34 0.43%] bought a controlling interest in Carlos SuperDrug for P340 million in November of 2020, and then MM was back at it again just a couple of days later, buying a controlling stake in Cecile’s Pharmacy.

While pharmacies might not have performed amazingly well during the lockdowns of 2020 and 2021 (the data from RRHI seemed to suggest that pharmacies perform better when people are taking their regular, everyday trips to the hospital), they were allowed to remain open during even the strictest of lockdowns.

So, while we’re probably not likely to see a repeat of those dark hard lockdown days, pharmacy owners can rest easy with the near-certainty that their locations will be allowed to remain open in almost any circumstance.

Pharmacies have a light moat, in that they require a layer of specialized knowledge and licensing to operate, and are one of the key components to the wider healthcare industry that will continue to grow as the Philippine middle-class grows.

Sure, middle-class growth has probably been stunted somewhat by COVID, but the demographics don’t lie, and the big players are busy throwing big money at bets that will pay off in the years and decades ahead. 

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Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

AYALA CORP

MERRYMART CONSUMER CORP

PHILIPPINE STOCK EXCHANGE

ROBINSONS RETAILS HOLDINGS INC

SM PRIME HOLDINGS INC

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