"Aspen took the time and effort to respond to each news article one by one -> Response To Media Reports Following Pre-closed Period Conference Call. The most important line for shareholders however is that Aspen will release a trading update when they are certain of what they are expected to achieve for the full year. The analyst community have pretty lofty expectations for the company, expecting them to earn over 40 percent more than last year."
To market, to market to buy a fat pig. Markets fell here Friday, the all share down just over one quarter of a percent. Aspen was routed and in a turn up for the books, ABIL surged ten percent. Why did Aspen get trounced like that? Well, there was a conference call in which the company told analysts many, many things. South American Merck portfolio products out of stock, but equally the South African anti-retroviral tenders have been weak and margins in this business have been impacted. That has been telegraphed though.
This was not a conference call where the media was invited, it was an analyst call before the full year closes out, that is today. Searching across the Aspen website I came across two things that were more than interesting, both under the front segment of their website. First, the results published are strangely in Latin seemingly and second, below that our very own Paul Theron and Vestact get a mention, thanks to the Hot Stoxx show:
Thanks Aspen for the Latin, I am not sure whether this has to do with the publishing platform on their website, or whether it is intentional. Mostly though, thanks for the video where of course Paul thinks that Aspen is hot. But because Aspen is a rather large holding in many of our client portfolios, the six percent fall on Friday has to hurt! Spare a thought for those folks that would have bought the stock on Friday at 313 ZAR only to see it close at 288 ZAR. And I guess we are about to close out the first half of the year, many money managers would be, how does one say, disappointed. Of course context is needed, the company and share price have done really, really well. Over the last 12 months the stock is up 26.8 percent, that is still a fabulous return.
Right, to listen in to the pre-close period conference call, you can call 011 305 2030 and then plug in the playback access code, which is 31356#. I listened in there. Gus Attridge leads and it is all rather business as usual. Political unrest in the rest of Africa business is weighing in Nigeria and Kenya. Stephen Saad then comes on the conference call to add a little "colour" as Gus Attridge uses analyst speak. Stephen fleshes out the supply problems at a Brazilian plant. He uses the word colour again. Lovely.
Government a problem here as a customer on the ARV's. 100 million Rand a month disappeared for a while (in revenues), the recovery in that far off. That is the part that I think spooked most people, there seems to have also been some confusion from the analyst community around the heparin (the anti coagulant) manufacturing at the PE plant (when only the vials are being manufactured there for the time being), with the thinking that it would be done here. And by here, I mean PE and not abroad. The Boks were excellent in PE, not so? Scotland were never in it, oh dear.
Oh dear to the Aspen shareholders too, a couple of really tough sessions, but the share price is still three and a half percent better on the month after a poor two days. I listened to the whole call, around half an hour and then I read that Stephen Saad was a little surprised about the share price falling on Friday. Me too. Mind you, the price had rocketed forward over the last 30 days, as I mentioned. This morning there is a bounce in the price, up around two and a half percent.
Trigger happy selling perhaps, the results themselves will provide a lot more clarity around the issues raised in the conference call, I am thinking that NEXT time there must be transcript associated with the call, when you are moving at high speed there is no pause and rewind as we have gotten used to on the PVR, that does not exist on any conference call.
This message is written real time and as such Aspen have now issued a SENS message with the related comments from the call. The message is clear, the said analyst was taken out of context: "Unfortunately certain comments made by Aspen management have either been misconstrued or have been quoted out of context and have now appeared in certain sections of the media creating uncertainty in the market."
I think that you need context, you need the original press reports in which the quoted analyst is corrected, a Bloomberg article: Aspen Falls After Managers Tell Analysts Second Half Was Weaker.
Aspen took the time and effort to respond to each news article one by one -> Response To Media Reports Following Pre-closed Period Conference Call. The most important line for shareholders however is that Aspen will release a trading update when they are certain of what they are expected to achieve for the full year. The analyst community have pretty lofty expectations for the company, expecting them to earn over 40 percent more than last year.
This is a great example however after the market shooting first and then asking questions later. The SENS puts the negativity that was associated with the South African business into context: "In the presentation on Aspen's 2014 interim results referred to above, it is disclosed that revenue from ARV tenders in South Africa for the six months ended 31 December 2013 amounted to R525 million. This was 14% of the total South African revenue and 4% of the total Group revenue reported for this period." So a very small part of their business is having a very big problem. And to add to that very small part of their business, it is one of their businesses with the worst margins too.
Seeing as we never have to trade aggressively around any of these events the damage is limited to a drawdown in the P&L column. We continue to accumulate what we think is a fabulous company and anticipate that the businesses that have been added over the last 12 months will become stronger profit contributors in the coming years. I know that sounds a bit vague, and it is, but because we back what is a great management team operating in fast growing developing markets and selling products that continue to grow quickly, the market affords the company a high multiple for a reason.
Home again, home again, jiggety-jog. Markets are flat here. For all those people who are very excitable, note that Friday is non-farm payrolls. Perhaps another chance to react to data. It is of course the most anticipated data point of the month, with much excitement generated across the box and on the Twitter thingie.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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