An ever-growing company in an everchanging world
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