I expect a tough market for the rest of 2020 thanks to the
coronavirus (Covid-19) and as I write this ahead of the open on
the morning of Monday 9 March, the global markets look set for
a 5% lower opening as oil gets crushed (see p.13).
For those looking for some safety in these wild markets, a
solid preference share offers decent yields at relatively low risk.
The yield on Grindrod’s preference share is 11% and linked
to the prime interest rate. Thus, as the Reserve Bank cuts rates
- as I expect it will do – the yield will drop but will remain well
ahead of inflation and likely also well ahead of equity returns
for the next year. This preference share pays an interest equal
to 80% of the prime rate. As the share price is well below the
actual R100 debt face value, we get a better yield.
The main risk to holding this share is a default from Grindrod.
Their latest results were strong, and a default is unlikely. If
anything, the company may be taken over and delisted, in which
case shareholders will get paid out the R100. ■
ASPEN PHARMACARE BUY SELL HOLD By Moxima Gama
Aspen to resume dividends
GRINDROD PREFERENCE SHARES BUY SELL HOLD By Simon Brown
house view marketplace
Shield your portfolio
Pho
to:^
Gal
lo/
Get
ty^ I
ma
ges
Aspen Pharmacare is a South African-based supplier and
manufacturer of branded and generic pharmaceutical products,
including infant nutritional and consumer healthcare products.
The nearly 170-year-old drug maker, with a presence in about
56 countries, announced that its normalised headline earnings
per share from continuing operations rose to 707c/share in the
six months through 31 December compared with the restated
702.4c/share in the comparable period a year earlier, according to
its financial statements for the period.
Over the past year Aspen has been disposing of non-core
assets in order to reduce its debt, which it has managed to cut
from R53.5bn in December 2018 to R38.9bn by the end of June
- Early in March the drug maker announced that it received
R4.6bn in February from the sale of its Japanese operation in
January, which has further reduced its debt by 2.8% in its latest
financial year results. Based on this, Aspen will now consider
resuming dividend payments in September 2020. Regarding
the coronavirus outbreak, Aspen CEO Stephen Saad admits
that it will affect the company’s performance, since their Chinese
commercial team has been largely inactive since February.
How to trade it:
Aspen has been encountering major resistance at 12 525c/
share since the beginning of the year. It pulled back in the
near term and is now recovering some of those losses. Upside
through 11 650c/share could see Aspen retest the 12 525c/
share major level. Breaching it would trigger a buy signal with
potential upside to 18 000c/share.
Alternatively, if Aspen continues to find a ceiling at 12 525c/
share, it could fall back to support at 8 510c/share or its prior low
at 6 456c/share. In which case, refrain from going long. ■
[email protected]
SELL
BUY
BUY
SELL
BUY
CAUTION
BUY
BUY
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Aspen CEO Stephen
Saad admits that
the coronavirus
outbreak will affect
the company’s
performance.
@finweek finweek finweekmagazine finweek^ 19 March 2020^15
Stephen Saad
CEO of Aspen
The yield on Grindrod’s
preference share is
11%
and linked to the prime
interest rate.