It has recently been relatively quiet on the stock exchange floor around the Corona profiteer Zur Rose. For a long time, the trend towards online purchases accelerated by the pandemic led to a breathtaking rally that saw the share price peek above the CHF 500 mark at the beginning of the year. Afterwards, however, the share price fell back bit by bit. In less than 3 months, the mail-order pharmacy even lost around half of its enterprise value.
The plunge did not come as a complete surprise; there are solid reasons for the correction. To this end, a brief review: In the 2020 financial year, the domestic pharmaceutical retail group slipped into the red much more than expected. The bottom line was a handsome loss of CHF 135 million; in the previous year, the loss was not even half as high. In addition, the break-even point adjusted for growth initiatives was clearly missed with a negative Ebitda of CHF 31.2 million.
On the sales side, meanwhile, the upward trend continued. In the past year, the business volume, including the two acquired companies Medpex and Apotal, expanded by 11.7% to CHF 1.75 billion. In the first quarter of 2021, growth even accelerated to 17.8%. The pace is likely to accelerate even further over the rest of the year: The Doc Morris parent company forecasts a one-fifth increase in sales for 2021.
The Thurgau-based mail-order pharmacy is drawing hope above all from the imminent launch of e-prescription in Germany. Management expects the introduction of electronic medication prescriptions in the second half of the year to lead to major sales leaps in the future. The group already generates more than half of its revenues in the neighbouring country. Zur Rose expects to increase sales organically to CHF 4 billion in the medium term. By 2023, the company should also be in the black. Analysts expect earnings per share of CHF 0.20 on average at this point in time. On its way to profitability, Zur Rose is relying not only on strong sales growth, but also on efficiency gains. For example, the two subsidiaries apo-rot and DocMorris in Germany will be merged as of 30 June.
The company's overarching goal is to evolve from a pure medicine retailer into a pan-European digital health ecosystem under the DocMorris umbrella brand. To achieve this, Zur Rose is relying on partnerships with Novo Nordisk, for example, as well as Migros. With the latter, the Group operates a shop-in-shop concept as well as an online shop. In addition, a joint venture was founded with the insurance partners Allianz Care, CSS and Visana to operate a comprehensive digital health platform in Switzerland. On this platform, a wide range of players such as insurers, doctors, hospitals and pharmacies can offer their services and give patients access to comprehensive healthcare services with just one click. The platform is scheduled to go live in the current quarter.
Even though rumours have recently emerged that the introduction of electronic prescriptions could be delayed, the trend towards digitisation in the sector is likely to be unstoppable. Therefore, Zur Rose's ambitious growth plan could also work out sooner or later. The majority of market participants now also seem to think so, and the share stopped its downward slide in the CHF 275 area. After a brief rebound, the price is now moving sideways between CHF 325 and 375. The consolidation is framed by two moving averages. While the 200-day line provides support on the downside, the 100-day line - together with a horizontal barrier - currently limits the upside potential at CHF 375.
For the new Softcallable Barrier Reverse Convertible, there is no need to change the current chart situation of the Zur Rose share. The product already offers an attractive yield opportunity in a sideways price trend or with moderately falling prices. The BRC, which is denominated in Swiss francs, has an above-average coupon of 10.00% p.a. for a single product. The risk buffer of 41% provides comfortable protection. The SPI-listed share was last quoted at the barrier level around a year ago. The maximum term is 18 months, and the first soft call is made after 6 months.
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