Aspen under pressure
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.