ASPEN: 14,217 +117 (+0.83%)
Aspen Pharma suffers week of woe as valuation tumbles by $3 bln
* Investors spooked by debt levels and sale of baby milk
* Share price has dropped by 35 pct in just over a week
JOHANNESBURG, Sept 21 (Reuters) - Aspen Pharmacare
has lost about 45 billion rand ($3 billion) of its market value
in just over a week in a sell-off sparked by concern over the
South African company's debt and the sale of its baby formula
The company's share price has tumbled more than 35 percent
since it posted full-year results and announced the baby milk
disposal to French dairy group Lactalis.
Shares in Aspen were down 2.1 percent at 173.52 rand at 1451
GMT on Friday, their lowest level since 2013. The week's decline
has taken Aspen's valuation to less than 80 billion rand, a far
cry from the 124 billion rand of a week ago.
Analysts have attributed the stock's decline partly to
Aspen's debt, which has hit levels that typically set alarm
bells ringing, with net debt at four times normalised core
Aspen, meanwhile, has said it will lower its debt with
proceeds from the 11.2 billion rand sale of the infant milk
"I think the investment community saw it as a forced sale
because they were about to breach their debt covenant. It is a
highly indebted company," said Mark Loubser, fund manager at
Increased investor caution has also been a factor, said
Vestact Portfolio manager Michael Treherne, citing the heavy
losses made by some Steinhoff shareholders after the
furniture retailer admitted in December to accounting fraud,
which nearly tipped it into bankruptcy.
"Investors are just more cautious," Vestact Portfolio
manager Michael Treherne said. "Some investors are drawing
parallels between Aspen and Steinhoff and are just saying, 'I
can't afford another Steinhoff'."
Some analysts attributed Aspen's share price fall to an
anaemic growth outlook and pressure expected across its
therapeutic brands and other pharmaceutical brands.
The company, which also operates in Europe, is targeting
organic revenue growth of between 1 percent and 4 percent in its
commercial pharmaceuticals business for the 2019 financial year.
"I think it is much more to do with the past three years and
the journey that Aspen has been on," said Sanlam Investment
Management fund manager Ricco Friedrich.
"The strategy that has been set may be falling short. Having
said that, a 34 percent or more fall in share price on just a 6
percent miss in earnings is an overreaction."
($1 = 14.4029 rand)
(Reporting by Patricia Aruo
Writing by Nqobile Dludla
Editing by David Goodman)
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