Our opinion on the current state of ASC

Ascendis Health (ASC) is a South African company which manufactures brands aimed at health in animals, plants, and people. On 30th January 2020, the company said, "As Remedica continues to be a high performing asset that delivers considerable earnings and margin growth to the Ascendis group, the Board is not supportive of the disposal of Remedica at a price that is not reflective of its market value". Its objective is to focus on four businesses - pharmaceuticals, medical, consumer health and animal health. On 25th January 2021, the company announced that it was now negotiating with two companies, L1 Health and Blantyre Capital to recapitalise the company rather than selling off Remedica. Those two companies acquired 75% of Ascendis' debt and on 12th May 2021 struck a deal in terms of which they exchanged debt of 447m euros, a 20m euro draw-down facility and a 15m euro loan for 100% of Remedica and Sunwave, 49% of Farmalider and the proceeds of the sale of Animal health and Biosciences and Respiratory Care Africa. The company said, "The Proposed Transaction represents the best opportunity to protect the business and is also considered better than placing the Group in Business Rescue, the likely result if an agreement was not reached. An important part of the Group Recapitalisation framework is Ascendis Health’s access to sufficient liquidity to operate in the future". Following the approval by 98% of the shareholders on 4th October 2021 of the scheme, the company now only has assets inside South Africa. On 19th July 2021 the company announced that it had sold its animal health division valued at about R770m. The proceeds will be used to reduce debt. Following the recapitalisation, the company is considering de-listing from the JSE. In its results for the six months to 31st December 2022 the company reported revenue flat at R777m and a headline loss per share of 29,4c. The company said, "During the current period, Ascendis Pharma (“Pharma”) was sold for a net cash consideration of R444 million effective 31 October 2022, with the transition team negotiating an additional R57 million on the original purchase price and ultimately realising net proceeds of R69 million more than the initial proposed transaction. A rights offer was successfully undertaken in August 2022, raising R101.5 million to enable the group to manage its liquidity needs while repaying the outstanding debt". In a trading statement for the year to 30th June 2023 the company estimated that it would make a headline loss of between 35,7c and 43,6c compared with a loss of 80,8c (restated) in the previous year. Technically, the share peaked at 2880c in October 2016 and subsequently fell as far as 55c. We suggested applying a 200-day simple moving average and waiting for a clear upside breakout. The share has moved sideways and eventually moved through that moving average but still shows no signs of a new upward trend. Now at around 69c following the debt agreement, it looks like reasonable value.