Our opinion on the current state of APN

Aspen (APN) is a pharmaceutical company which trades in 150 countries in a wide range of specialty and branded products aimed at a range of acute and chronic medical conditions. They have 25 manufacturing facilities on 15 sites. Their main product categories are thrombosis, anaesthetics, cytotoxics and nutritionals. Pharmaceuticals generally are a defensive industry which does well even during a recession because people are compelled to buy chronic medications. However, a major factor in Aspen's case is the strength of the rand. In the longer term, the company expects that its interests in China will eventually be larger than its South African interests. The company's business is now "heavily weighted" towards emerging markets. In its results for the year to 30th June 2023 the company reported revenue up 5% and headline earnings per share (HEPS) down 4%. The company said, "Commercial Pharmaceuticals revenue growing 6% (-1% CER) and Manufacturing revenue increasing by 3% (-6% CER). Gross profit grew 3% (-4% CER) ending lower than the growth in revenue with the impressive improvement in Commercial Pharmaceutical gross profit margins being more than offset by the loss of COVID vaccine contribution in Manufacturing. Normalised EBITDA rose 1% (-6% CER) to R11 100 million". The company's P:E ratio of 12,19 is not demanding for a solid, international, blue-chip, rand-hedge like this - especially one which appears to have benefited from the pandemic. To this you must add that its CEO, Stephen Saad, and his deputy, Gus Attridge, have bought about R110m worth of Aspen shares at lower levels - which shows that they have a strong belief that the shares were cheap. So, we believe that it is a good investment at current levels but suggested waiting for it to break above its long-term downward trendline. That break came on 1st September 2022 at about R156 per share. It then moved sideways and has recently broken up strongly to R171.35.