Sigma Health (SIG) – London Calling

Sigma Healthcare operates as a retail pharmacy franchisor and pharmaceutical wholesale and distributor to community pharmacies primarily in Australia, with its flagship brands being Chemist Warehouse, Amcal, and Discount Drug stores. The company was founded in 1912 and is headquartered in Clayton, Australia.

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Sigma Health’strading update highlighted three key positives:

1) FY26 Australian ChemistWarehouse store sales were up 16.7%, while international sales leapt 24.7%;

2) the signing of a MoU with GreenLight Healthcare that will see Chemist Warehouse enter the UK market; and,

3) the establishment of a new distribution in NewZealand.

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We note that Australian like-for-like (LFL) sales growth of 14.4% implies around 13.5% growth in the second half of FY26 to date, a faster pace than the 12.3% rate noted in February. This remains above expectations, with Chemist Warehouse comfortably navigating macroeconomic volatility and higher GLP1 weight-loss comparisons.

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Chemist Warehouse will enter the UK market via a JV with GreenLight, a British pharmacy group founded in 1999 with 22 stores across Greater London. Phase 1 of the agreement to focus on five initial stores with Sigma set to acquire a 75% interest in each, while GreenLight leverages Chemist Warehouse’s intellectual property (IP) and retail support. It is, in effect, only a pilot operation at this stage, but we see the UK opportunity as significant it is a large and fragmented market – more than 13,000 pharmacies, with Boots being the No.1 player with 13% share and independents making up 29%. The traditional UK pharmacy model is also under stress, with around 47% of stores making losses at the operating earnings (EBITDA) line, and the industry exhibits only limited retail innovation given a strong dispensary skew.

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We raise our target price on Sigma to $3.40 from $3.30 and reiterate our Buy recommendation.

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