Aspen Pharmacare Holdings Ltd: The Amicable Break-up Seems Favourable

11 January 2017 | SA Views | Moxima Gama
 


Aspen may have started the year on a good note, as British pharmaceutical company Glaxo- SmithKline (GSK) paid the JSE-listed company R761.07m  to conclude its sub-Saharan Africa collaboration - officially ending the partnership between the two pharmaceutical companies, after its announcement in September 2016. This information stopped the share price from plummeting further, as it found support at 26,510cps and seems to be recovering.

The collaboration generated approximately R2.6 billion of gross revenue in the 2016 financial year. The two pharmaceutical companies entered into a collaboration arrangement for the commercialisation of a portfolio of branded prescription pharmaceutical products to increase affordable healthcare in sub-Saharan Africa. GSK started gradually divesting its stake in Aspen since November 2013, when it sold 28.2 million shares for about R7bn. Their reasoning? To deploy capital elsewhere in order to develop new products and diversifying its business.

GSK joins a host of pharma companies seeking to slim down and focus on growth areas by selling non-core assets. Investors seem relieved that the collaboration is over - ending the overhang caused by this uncertainty.

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Technical view:

With the 26,510cps level providing strong support from a 32% fall, Aspen could be set to recover and abandon its steep bear trend. A positive breakout would be confirmed above 28,800cps - go long - with potential upside to 35,000cps. Maintain a tight stop-loss at first, then establish a fair trailing level as the share price rises. Alternatively, continued downside through 26,510cps could see Aspen retest the 21,000cps support level or even the 18,000cps mark. In this case, refrain from going long.


Moxima

Moxima Gama
Technical Analyst, Sharenet

Moxima has a B.Comm Finance from the University of South Africa and is a certified Chartered Market Technician Level 2, currently completing Level 3. She has been a technical analyst for 10 years, working for BJM, Noah Financial Innovation and for Standard Bank as part of the Research Team in the Treasury Division of CIB. She now runs her own business, The Money Hub, and consults for Sharenet. Moxima has been rated as one of the top 5 technical analysts in South Africa and outperformed the market during the recent recession. She regularly makes an appearance as a guest on CNBC Africa and writes often for Finweek and Sharenet’s Views.

Read an interview with Moxima, or discover Moxima’s trading insights via Sharenet’s Technical Analysis Newsletter.


Disclaimer:
The information contained in this article is for informational purposes only and must not be regarded as a prospectus for any security, financial product or transaction. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial issue. Investors should consider this research/article as only a single factor in making their investment decision. We recommend you consult a financial planner/advisor to take into account your particular investment objectives, financial situation and individual needs. The views and opinions (where expressed) in this article are those of the author and do not necessarily reflect the official policy or position of Sharenet.

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