Ac­qui­si­tions should give it a shot in the bot­tom

Financial Mail - Investors Monthly - - Analysis -

As­cendis, which listed in late 2013, ap­pears to have over­come the mar­ket’s ini­tial fear that patch­ing to­gether niche health­care brands by rapid ac­qui­si­tion might not gel into a com­pelling con­glom­er­ate struc­ture.

Direc­tors have stressed that ac­qui­si­tions in­volve sus­tain­ably prof­itable and cash-gen­er­a­tive as­sets that can be slot­ted as stand­alone op­er­a­tions into a cor­po­rate struc­ture that un­locks ef­fi­cien­cies by cen­tral­is­ing mar­ket­ing, dis­tri­bu­tion and ad­min­is­tra­tion func­tions.

As­cendis es­ti­mates that ac­qui­si­tions since June 2014 have added more than 30% an­nu­alised growth to head­line earn­ings since the last fi­nan­cial year. So no sur­prise then that turn­around sit­u­a­tions are not con­tem­plated by As­cendis, at least at this stage.

In truth, it’s early days in judg­ing As­cendis’s business model. But the re­cent strong buy-in from smaller in­sti­tu­tions to a R400m shares-for-cash is­sue sug­gests grow­ing mar­ket in­ter­est in its propo­si­tion.

Fun­da­men­tally, the re­cent year to end-June re­sults pre­scribed some sooth­ing key num­bers, even if a full check-up is dif­fi­cult on the per­for­mance po­ten­tial of As­cendis be­cause of four key ac­qui­si­tions since the June year-end.

Com­par­a­tive fig­ures are mean­ing­less, but it’s worth not­ing the chunky 45% gross mar­gin and a more than de­cent 13% op­er­at­ing mar­gin.

As­cendis also boasts a sur­pris­ingly good cash con­ver­sion ra­tio (con­sid­er­ing re­tail­ers

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