Market waits to see if Ascendis will deliver

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Ascendis chief executive Dr Karsten Wellner says the firm's share price will correct itself. Photo: Supplied

Johannesburg - It has been just over six months since Ascendis Health listed on the JSE and, when it comes to communication, it appears to be doing everything by the book.

On Thursday night it scooped the Investment Analyst Society award in the category for small-cap companies (below R5 billion market capitalisation) because of the way it reports and interacts with stock analysts and the public.

The company’s share price, however, presents a journey that has not been as smooth.

Ascendis priced its shares at R11 when listing in November and in February they dipped to R9.47. On Friday the shares closed at R10.79, a rise of 1.89 percent on the day.

“The share price at the moment lags our development. Are we worried? No. I think the market is waiting to see if we deliver what we promised,” Ascendis chief executive Dr Karsten Wellner said on Friday.

He said the management’s priority was to deliver on its promises made before listing: a return for investors.

Investor returns came in three forms: dividends, profit and share price performance. Wellner realised that share performance had not delivered the expected return yet, but said Ascendis would focus its attention on operations and let the share price “correct itself”.

“It will follow us because we are growing above the market organically and are focused on our acquisition plans,” he said.

When Ascendis announced its interim results in March, its share price shot up from R10.20 to R11.20 after its operating profit increased more than threefold. Analysts said the performance demonstrated that the group was capable of exceeding its pre-listing targets for the year to June.

Wellner expected that as investors “waited” to see if the company would deliver on its targets when it reported its full-year results in two weeks’ time, a similar share performance pattern would be seen.

In the months before and after its listing, Ascendis has had a string of acquisitions, mostly family-run business that offer health-care products aimed at the high living standards measurement market.

This month it was busy with two acquisitions. It first announced the completion of a 100 percent acquisition of Pharma Natura after getting the Competition Commission’s nod.

On Thursday it announced another 100 percent acquisition – this time of specialist medical devices company Respiratory Care Africa. Wellner expected to get competition authorities’ approval around September.

These transactions, coupled with organic growth, have put Ascendis’s market cap at R2.6bn. But even with the rapid acquisitive growth, Ingham Analytics described it as a group that had been assembled methodically and with strategic purpose and not by chance acquisitions.

The acquisition team of Ascendis’s parent firm, Coast 2 Coast, which consists of 11 chartered accountants in Johannesburg and 11 in Cape Town, demonstrates Ingham Analytics’s point.

When buying the family businesses, Wellner said the strategy was first to retain the management team and to try to “keep the freedom of the entrepreneur”. This would be achieved by not getting too involved in sales and marketing functions but rather providing back-office functions like legal resources, human resources, supply chain and cash pooling so that the management could focus on the bottom line.

“But we don’t acquire and leave the company alone. We do that in some cases with our divisional platform companies or when a company has a good structure. But generally we want to buy and integrate as much as possible,” said Wellner.

He said this was the strategy that would allow Ascendis to deliver on its promises. - Business Report


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