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China Nepstar Chain Drugstore Ltd. Message Board

  • geoffreybatt geoffreybatt Aug 7, 2009 9:38 AM Flag

    And the reason is...

    China Retail Top 100: One New Entry from Guangdong Province (Nanfang Daily) 2009-8-7



    China General Chamber of Commerce published 2008 China Retail Top 100 list yesterday. The entry level was sales revenue RMB 1,960,000,000, which is approximately 26% higher than that of 2007. Thirteen enterprises on list of 2007 were washed out in 2008. Guangdong province gets seven seats in the top 100, including one new entry in 2008.

    The seven enterprises from Guangzhou includes China Resources Vanguard, A Best, Grand Buy, Guangzhou Friendship and so on. Compared with 2007, Guangdong province gets one new entry in 2008, China Nepstar Chain Drugstore.

    "Retail industry in Guangdong province is comparatively mature", commented by Mr. Xiong Sun, Chairman of Guangdong Chain Operations Association, "Although last year Guangdong province was seriously affected by financial crisis, many retailers still reported good performance in their branches or stores out of Guangdong, and it brought a sustainable development to their business. Actually there are still other brilliant large retail enterprises in Guangdong, and they are catching up with the Top 100"

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    • Well, thanks for having clarified your argument. I still have a hard time believing that this newsletter can move a stock like NPD. In some ways, it's bad news for long time shareholders...

    • stewiegriffin88888888 stewiegriffin88888888 Aug 13, 2009 11:52 PM Flag

      August 6, 2009

      In this Issue:
      China's Markets Continue to Outperform
      China's Evolving Pharmaceutical Industry
      New Recommendation: China Nepstar Chain Drugstore
      Sell Cogo Group
      Company Updates
      New Recommendation: China Nepstar Chain Drugstore
      Based in Shenzhen, China Nepstar Chain Drugstore Ltd. (NYSE: NPD) is what I'd consider China's Walgreens. Fourteen years ago, the company actually pioneered the idea of chain pharmacies in China, growing from a single shop to the biggest retail drugstore chain in China. Today, it has more than 2,300 drugstores in 63 cities, offering more than 1,000 private label products that include prescription drugs, over-the-counter medications, nutritional supplements, herbal products, consumable medical devices and personal care products.

      Nepstar's green drugstores are now a familiar structure in many Chinese neighborhoods. With its high-quality product offerings, professional pharmacy services and convenience, the company has built a strong brand name and captured a leading market position in China. Nepstar's strategy of centralized procurement, competitive pricing, customer loyalty programs and private label offerings has enabled the company to capitalize on the robust economic growth in China.

      Because of Nepstar's impressive success over the years -- opening more than one new store per day between 2005 and 2006 -- my former employer, investment bank Goldman Sachs, was an early investor in the company. Today, the Wall Street giant still owns a 24% interest in Nepstar and has representation on the company's board. Goldman's proprietary investment group in Asia has a track record of making big returns using the company's capital, and Nepstar is no exception.

      In fact, Nepstar has found success in China's pharmaceutical retailing business as evidenced by its financial results. In 2008, revenues grew 23% to $351 million, while net income rose 30% to $28 million. Gross margin -- one of my favorite indicators of a company's operating performance, as you know -- jumped to 47.5%. Plus, the company announced a cash dividend of 35 cents per share, or a 5.6% dividend yield at current price, in March. The company has a policy of distributing at least 50% of its income as dividend. And it has an excellent balance sheet with $363.2 million in cash without any liabilities -- just the cash alone is worth $3.50 per share!

      Despite the company's strong results, though, Nepstar's business temporarily slowed down in the fourth quarter of 2008 and first quarter of this year, due to a slowdown in export-focused southern China. But I think the worst is over for the company. Thanks to the government's stimulus package, China's strong economic recovery and related health care reform plan, I look for a turnaround in the Nepstar's business this year. I expect revenues to start to pick up in the second quarter and grow in the second half of this year.




      Because of the downturn earlier in the year, Nepstar shares are on a fire sale right now. After rising above $20 shortly after its IPO in November 2007, shares dropped to as low as $3. Shares are now recovering, and NPD's upside is huge. It has everything we look for in a Chinese growth stock: high growth potential, strong support from government policy, outstanding management, sponsorship from Goldman Sachs and even a high cash dividend yield!

      And Nepstar is well positioned to capitalize on the continued growth trend of China's drug retail sector. I spoke with the company's head of investor relations yesterday, and after that conversation, I think Nepstar is the best way for us to capitalize on China's health care reform. So I think we should take advantage of it by buying NPD under $7.30. I'm targeting at least a 30% return before year-end.

    • stewiegriffin88888888 stewiegriffin88888888 Aug 13, 2009 11:48 PM Flag

      This was my post 5 days ago and the stock price and daily volume of NPD this week has pretty much adhered to the patterns I set forth in the post, namely,

      Easy to prove that I am right.

      1) NPD will not appreciably get past the rec. buy price of $7.30 next week. The intraday highs may be around $7.30. Friday's high was $7.24.

      2) You will not get any important news from NPD or about NPD in the next few days to justify the move.

      3) The volume on this stock will revert back to the average daily volume figure by the middle of next week.

      4) NPD's price will begin to slowly depreciate by as early as late next week.

      5) If NPD takes a "pop" again during the AH on Thursday, it's because Robert Hsu (China Strategy) has reiterated his recommendation of NPD on his Thursday weekly update.

    • Not really. I would have to see what was written.

    • stewiegriffin88888888 stewiegriffin88888888 Aug 13, 2009 11:03 AM Flag

      Convinced now???

    • No it was not recommended in the newsletter, nor has it ever been with the China Strategy Newsletter. I cannot say the same for Hsu's $3k/year newsletter (Asia Edge), but I don't think he has. The China Strategy newsletter is worth it during the years that the China market is going up and woefully, tear-jerkingly, capital-draining during the years that China is going down (e.g. 2008) Good Luck.

    • I notice that the China biotech 3SBio (SSRX) had a similar jump about a week ago, again starting on Friday. Can you say whether this stock also was mentioned by the china Stratagy newsletter (on about July 30th?) If so, what was said. Thanks a lot. BTW, do you think the China Stratagy newsletter is worthwhile for a long term investor?

    • Easy to prove that I am right.

      1) NPD will not appreciably get past the rec. buy price of $7.30 next week. The intraday highs may be around $7.30. Friday's high was $7.24.

      2) You will not get any important news from NPD or about NPD in the next few days to justify the move.

      3) The volume on this stock will revert back to the average daily volume figure by the middle of next week.

      4) NPD's price will begin to slowly depreciate by as early as late next week.

      5) If NPD takes a "pop" again during the AH on Thursday, it's because Robert Hsu (China Strategy) has reiterated his recommendation of NPD on his Thursday weekly update.

      Whether you believe me or not, it is immaterial. All the posters on this board who subscribe to China Strategy know that I am 100% right on my assertion that NPS's pop on Fri. was solely due to the newsletter.

    • osooro@sbcglobal.net osooro Aug 7, 2009 10:46 PM Flag

      As China grows, this drug store chain will continue to grow. It won't make you rich overnight, but it is an excellent long term holding.

    • There were 1.6 million shares traded today, about six times the daily average for the last three months. With what's been traded yesterday, we're talking about something close to $12 million in transactions. I reiterate that I don't believe that a newsletter is responsible for this kind of activity. I may be wrong, by I remain skeptical.

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