Aspen has ended a medium-term correction from an overextended position by breaching a significant buying level at 33 000c/ share. A new R7.7bn deal with multinational pharmaceutical group AstraZeneca, which will see Aspen acquire the rights to sell a range of anaesthetic medicines, announced on 10 June, has buoyed the share price, sending it over 10% higher on the day.
The deal will be earningsaccretive for Aspen, which has seen its operating profit grow 41% to nearly R6.1bn in the six months to end December 2015, despite seeing net revenue decline by 3%.
The group, which has a presence in nearly 50 countries around the world, also announced earlier this month that it successfully completed a €3bn funding round, with revolving credit facilities provided in euros, Australian dollars and rand, with tenors of two to five years. The proceeds will be partly used for refinancing, as Aspen has spent in excess of $2bn on acquisitions in recent years, leading to its gearing totalling 44% by the end of December 2015.
Aspen said the finance deal, which was more than two times oversubscribed allowing it to raise €3bn, rather than the €1.5bn initially planned, was “highly successful against the wider backdrop of significant market volatility and the challenging macroeconomic environment”. How to trade it: A near-term pull-back from overbought levels should be anticipated. Support retained above 30 000c/share would be a positive sign – Aspen could recover its losses towards 41 595c/share in the short- to near-term. Go long at any level above 33 000c/share and maintain a trailing fair stop-loss as Aspen appreciates. Hold off long positions, should Aspen capitulate through 28 700c/share.