Aspen un­der pres­sure

Finweek English Edition - - HOUSE VIEW - BY MOXIMA GAMA ed­i­to­rial@fin­

ASPEN PHAR­MA­CARE, which is trad­ing at a price/earn­ings ra­tio of 28.18, may be one of the more ex­pen­sive shares on the JSE. One of the coun­try’s great busi­ness suc­cess sto­ries, Aspen has grown phe­nom­e­nally since its list­ing on the JSE in 1998, grow­ing into a group with a pres­ence in 47 coun­tries and a mar­ket cap­i­tal­i­sa­tion of R145.8bn. Phar­ma­ceu­ti­cal com­pa­nies are by na­ture more re­silient in tough eco­nomic times and Aspen was one of the few com­pa­nies to have shown de­fen­sive­ness through the eco­nomic down­turn in 2008 and 2009.

How­ever, its share price has been un­der pres­sure i n r ecent months, with Glax­oSmithK­line selling off half of its 12.4% stake in Aspen, and a weaker rand against the dol­lar and euro pro­vid­ing head­winds. A sub­stan­tial por­tion of its cost base is in euro and US dol­lar and the group also holds dol­lar-de­nom­i­nated debt.

De­spite the group’s con­tin­ued fo­cus on ac­qui­si­tions, par­tic­u­larly i n Asia, mo­men­tum is on the down­side. The share is al­ready down 20.8% since the start of the year, ac­cord­ing to Bloomberg data.

A key level at 34 800c/share was breached in the week of 17 Au­gust, but may be tested on a re­ver­sal which is soon du e . How­ever, si g n s of fur­ther bear­ish­ness – po­ten­tially to­wards 28 150c/share – will be­come ap­par­ent if t he r ecover y l oses s t eam be­low 34 800c/share. Ideally, Aspen would have to trade above 39 100c/share to es­cape bear­ish ter­ri­tory.

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