Pricked price

Finweek English Edition - - Companies & markets - SHAUN HAR­RIS

ON 27 FE­BRU­ARY the share price of phar­ma­ceu­ti­cal group Enaleni took a hit, drop­ping nearly 9% to 465c/ share. In ret­ro­spect the rea­son seems clear – Enaleni had just put out a trad­ing up­date with what it says were in­cor­rect fig­ures. Th­ese were cor­rected quickly through the is­sue of a re­vised trad­ing up­date, but the dam­age had al­ready been done to the share price.

The first up­date said head­line earn­ings per share were ex­pected to in­crease by 110% to 120%. The re­vi­sion said the in­crease would ac­tu­ally be be­tween 170% and 180%. Big in­creases, but ap­par­ently the first fore­cast dis­ap­pointed in­vestors ex­pect­ing large num­bers to con­tinue com­ing through from the in­te­gra­tion of Ci­pla Medpro, the gener­ics man­u­fac­turer Enaleni bought at the end of 2005 for R1,2bn. CEO Trevor Ed­wards tells us the first re­lease was just a mis­take. “We had the fig­ures, they were checked by the fi­nan­cial di­rec­tor and checked again. Twenty min­utes later we re­alised there was a mis­take.”

Fine. Ex­pec­ta­tions were that the re­vised up­date would see the share price re­cover. It hasn’t, last week the share was a bit lower at 455c/share. Why?

Well, the de­cline in Enaleni’s price was fol­lowed al­most im­me­di­ately by two other mar­ket-mov­ing events. Alan Greenspan rum­bled on about re­ces­sion, the Chi­nese mar­ket cracked, other Asian mar­kets tum­bled and the JSE caught the whiplash.

At home, larger ri­val As­pen put out re­sults that were not met too en­thu­si­as­ti­cally, prob­a­bly putting a gen­eral damp­ener on phar­ma­ceu­ti­cal stocks. This could be keep­ing a cap on Enaleni’s share price.

Fun­da­men­tals look good. The com­pany is spend­ing R90m up­grad­ing its man­u­fac­tur­ing fa­cil­ity, partly to meet in­ter­na­tional com­pli­ance stan­dards but mainly to in­crease ca­pac­ity to meet vol­umes ex­pected to in­crease by four times.

The up­grade will also place Enaleni in a bet­ter po­si­tion for Gov­ern­ment ten­ders for generic drugs that take place later this year.

On that ba­sis, share weak­ness now could be a buy­ing op­por­tu­nity.

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