China Nepstar Chain Drugstore Ltd filed with the US SEC on Wednesday for an initial public offering of American depositary shares on the NYSE. The shares, which will be listed under the symbol "NPD" are expected to raise as much as $250 million based on yesterday's SEC filing. The Form F-1 indicates that as of Sept. 30, Nepstar had 1,791 directly operated drugstores located in 62 cities in China. The company reports that it is the largest retail drugstore chain in China based on the number of directly operated stores, and that it had the highest revenue among all directly operated retail drugstore chains in China in 2004, 2005 and 2006.
With FY 2006 revenues of US$227.6 million, the company states its revenue CAGR from 2004 to 2006 was 43.4%. For the six months ending June 30, 2007 the company had revenues of US$124.3 million, an 18.4% increase over the same period last year.
The company plans to use proceeds from the IPO to fuel its continuing growth and will spend:
approximately US$52.0 million to open new stores; approximately US$11.0 million to upgrade their information management and inventory control system; approximately US$27.0 million to set up two new distribution centers; the remaining portion for other general corporate purposes and for potential acquisitions of retail drugstore chains or independently operated drugstores.
Nepstar specifically plans to grow in cities such as Beijing and Shanghai through acquisitions, where local regulations prohibit the opening of new drugstores within certain distances of an existing drugstore, and in cities that are close to their distribution centers. Goldman Sachs (Asia) LLC. and Merrill Lynch will be underwriting the IPO. Goldman, an early investor in Nepstar, holds 50 million shares with a basis of US$0.50 per share.
Disclosure: Author has a long position in GS