South Africa

Stock pick of the day – Aspen


Sentio Capital director and portfolio manager Imtiaz Suliman says Aspen is getting back on a path of growth and offers value at current levels.

Aspen is a multinational pharmaceutical company headquartered in South Africa which operates in over 150 countries across Africa, the Middle East, Asia, Australia, the Americas, and Europe.

It markets and manufactures a broad range of medicines and has two main business segments – manufacturing and commercial pharmaceuticals.

Aspen’s financial results for the year ended 30 June 2022 showed a 2% increase in revenue and a 36% increase in its earnings per share.

Aspen’s South African operations have also entered into a 10-year agreement with Serum Institute of India, the world’s largest vaccine producer.

The agreement slows Aspen to manufacture, market, and distribute four routine vaccines in Africa.

Commenting on Aspen, Suliman said the company’s ability to reduce its elevated debt levels signals that it may be on a new growth path.

He added that Aspen’s ability to produce vaccines would favour the group’s drive to produce vaccines in Africa for Africa.

Aspen’s share price has been under pressure this year, declining from R219 per share in January 2020 to R140 per share on 30 August.

However, after the earnings and vaccine deal was released, shareholders responded positively, and the share price jumped to 156.89.

Aspen finances

After strong revenue growth between 2013 and 2017, Aspen has come under pressure as shown in the charts below.

However, there are a few good signs.  Aspen lowered its net debt to EBITDA from the 2019 financial year to the 2021 financial year to 1.8, increasing its ability to maintain current debt levels.

Therefore, Suliman’s decision to pick Aspen as a good buy makes sense, especially with its new vaccine deal.