An ever-grow­ing com­pany in an ev­er­chang­ing world

Finweek English Edition - - INSIDE - BY STEIN­MAN DE BRUYN & IWAN SWIEGERS Di­rec­tors at New­strad­ing Cap­i­tal Mar­kets

Aspen Phar­ma­care Hold­ings, a gi­ant in the phar­ma­ceu­ti­cal in­dus­try that has re­warded its share­hold­ers hand­somely since the com­pany was founded by Stephen Saad in 1997, is start­ing to look very at­trac­tive once again.

The share price re­cently traded as high as R440, but came down on the back of Glax­oSmithK­line sell­ing half of its re­main­ing 12.4% stake in the com­pany for R372 a share. The $890m (around R11bn) deal was con­cluded through a share plac­ing, ef­fec­tively of­fer­ing pri­vate buy­ers the op­por­tu­nity to buy the stock at a dis­count to cur­rent value.

This cre­ated un­cer­tainty in the mar­ket on 13 March, the f irst day of trad­ing af­ter the an­nounce­ment was made. The stock traded as low as R382.01 as in­vestors scram­bled to de­ter­mine the value of the stock. Fun­da­men­tally noth­ing has changed, and although the stock may still show some weak­ness in the short term, we view the drop in share price as an op­por­tu­nity to start build­ing a long-term po­si­tion.

Aspen re­cently won a big stake in the anti-retro­vi­ral (ARV) ten­der re­leased by the Na­tional Trea­sury. The com­pany won a num­ber of key prod­ucts and ef­fec­tively se­cured 20% of the R14bn ten­der over three years, com­menc­ing 1 April, it said in a state­ment in De­cem­ber when the ten­der was an­nounced. Th­ese re­sults con­firmed Aspen’s abil­ity to land big projects, based en­tirely on man­age­ment’s abil­ity to con­clude deals through Aspen’s cost com­pet­i­tive­ness and world-class fa­cil­i­ties.

It also re­cently ac­quired the rights to an in­jectable anti-co­ag­u­lant from No­var­tis for $142.3m (R1.8bn). The prod­uct has only been com­mer­cialised in a cou­ple of coun­tries, and so rep­re­sents Aspen with the op­por­tu­nity to launch it in other coun­tries as well.

The news was fol­lowed by a strong up­date re­leased by Aspen on 5 March, show­ing a 22% in­crease in nor­malised head­line earn­ing per share for the six months ended De­cem­ber. Rev­enue from in­ter­na­tional op­er­a­tions in­creased by 158%, and now com­prises 46% of to­tal rev­enue.

Aspen’s f ocus on g r ow­ing it s in­ter­na­tional foot­print is start­ing to bear fruit and strate­gi­cally places the com­pany in a com­fort­able po­si­tion. The rev­enue di­ver­si­fi­ca­tion diversifies risk and places it in a po­si­tion to con­tinue to grow at a rapid pace.

Trad­ing at a cur­rent price-to-earn­ings ra­tio of 34.3, ac­cord­ing to Bloomberg data, Aspen’s stock may stil l seem ex­pen­sive but man­age­ment has a longterm game plan. Although we don’t al­ways know what it is, they have proven time and again that they are more than ca­pa­ble to con­tinue tak­ing the com­pany to new heights.

With the US look­ing strong, Europe f ight­ing a stag­nant econ­omy through quan­ti­ta­tive eas­ing (QE) and China slow­ing rapidly as it tries to move from an in­vest­ment driven econ­omy to­wards a con­sump­tion driven econ­omy, it is safe to say that the global econ­omy cur­rently f inds it­self be­tween a rock and a hard place, with no clear in­di­ca­tion of where it is go­ing from here.

This un­cer­tainty leads to dif­fi­cult mar­ket con­di­tions - all the more rea­son to in­vest in a solid, de­fen­sive and ev­er­grow­ing com­pany.

R263.65 - R448.68

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