Still looking good...
Aspen was the darling of the JSE for over a decade as the price went from 1 000c in 2004 to almost R450 in January last year. Then in March of last year GlaxoSmithKline announced it was selling a second tranche of Aspen shares and this spooked the market.
The reality is that GlaxoSmithKline held some 18% in Aspen and was always going to sell the stake down to zero. It had sold the first third back in February 2014, and will sell the remaining 6.19% in time.
Since last year’s sale Aspen has been under pressure, and even at these lower levels it remains a highly valued stock, with a price-to-earnings ratio (P/E) of some 35 times, while the latest deal with AstraZeneca has excited the market again. This deal will add some 15% to profit before tax, putting the purchase price on a P/E of some 15 times before tax – a great deal.
Healthcare is an excellent sector but I worry about legislative risk and, as such, always say the only space I would want to invest in is the generic drug manufacturers.