Greetings all Asking the forum here.. Thoughts on the above. Two scenarios my thinking. Ascendis selling Remedica to service their debt. What share percentage does Remedica have in Ascendis or is it the other way around. Will Ascendis have to relinquish some of their shares, or will the funds gained go into Ascendis. After serving the debt. Surely Remedica will be making pots of money... This virus is here and it's going to be around for a good while. So selling now is maybe not a good idea. I am sure there is other information, misinformation we don't know about.
On your question regarding Remedica and Acendis and the current share price behavior.
Remedica is wholly owned by Ascendis and is part of the Ascendis Health group. I agree that it is doing very well during this time, and surely will in the future. They contribute about 55% to Ascendis's earning according to the last Financials and they will probably contribute 60-65% of future earnings. Remedica is by far the best company in the Ascendis group.
Remedica was up for sale last year, but no agreement could be reached and talks were ended in Dec 2019. I have an idea who were involved, but I'm not 100% sure. Let's leave it there.
Ascendis has lost 97% of its share price from its highs in 2016 (R28-00). There are a thousand ways you can calculate the value of Ascendis and in each you will find that it is seriously undervalued and in all respects. Anything from R2-80 to R8-30 would be an intelligent fair valuation for their share price.
I have been monitoring Ascendis for some time now and in the last 3 weeks, the valuation has changed by my program. The projected price has now changed from R6-75 to R3-87 recently, about 50% lower!!
Now I know that the outlook for Remedica is brighter than ever and with the weak Rand, they are smashing earnings. "So why has the projected price by my program changed?" I have come to trust my program's projections, and rather than asking how I rather ask why it is giving this projected price. What changed from 2 months or 2 weeks ago to today? My program picks up on share price movement and over the past 2 months, this share price is not behaving as it should. This has made me spend a lot of time digging for answers.
Let's just say I there was news that Remedica is back up for sale a while ago. This news was quick news, but a lot of it has been removed and has died down a lot lately.
Now if I was interested in buying Remedica, and I could not buy it the previous time for R4,35 billion, what would the next step be? When companies like Ascendis lose 97+% of their value.....a takeover is exactly what I would do. So what is Ascendis worth? Hmmm .....less than 1/10th of the price for what they wanted for Remedica...only R400 million. Remedica is probably worth R6-7 Billion currently and it would not make sense to buy it if you can do a takeover for a fraction of the price and take their debt of R4,9 bil.
Now takeovers can be very profitable exercises for large companies when planned right. There are a couple of things they usually do to add huge value when doing a takeover or Acquisition. First and foremost is to keep it from the media........Why has the news about Remedica up for sale been kept so quiet recently? If I was the company trying to negotiate a takeover I would tell Ascendis to remove all media reports and halt any promotions regarding the sale of Remedica as this will jeopardize negotiations.
Below is basically what determines a merger's price agreement. I have seen quite a few and in almost all cases the 30day weighted moving average price is used as the value of a company.
Who would be interested in buying Ascendis? Aspen would be an obvious choice, and rightly so. They are in direct competition in many fields and this would add a very profitable business as well as eliminate competition in this and other fields.
Let's have a quick look at a "recent" takeover of Lonmin by Sibanye. Let me paint the picture. Lonmin has lost about 98,2% of its value since the highs of R600/share and was trading around the R14-00 mark before the takeover offer was made by Sibanye. Losing R164 Billion in Value to just a Market Cap of R4 billion. It had previously even gone as low as 20c per share, losing 99,96% of its value.
Of interest is the price movement 2 months before the announcement was made public (See chart below). At the beginning of Oct 2017 the price started moving upwards. (From first up arrow). This was probably caused by insider info that Sibanye has proposed an offer to Lonmin to do a takeover and that the price would be much higher than the current price.
Then, a little more than a month before the announcement was made (2nd Arrow), the price tanked with relative precision given by the 30-day Weighted Average price and it dropped by 28% up to a day before the announcement at around R11-50.
Below is the Chart of Sibanye over the same period, and it has gained 10,3% in the 5 weeks before the announcement.
These are typical movements when takeovers are involved. It is usually much easier to move the smaller companies' share price than the larger one. These shares were in the same sector with quite a difference in movement before a takeover offer is done.
So what has happened over the last 6 weeks between.......... let's say ...... Aspen and Ascendis?
Well, the weighted 30-day Average price of Aspen gained 35,5% and Ascendis lost 7%. Both are in the same sector, but the sector does about +25%, so Aspen outperformed by +10% and Ascendis underperformed by about -32%.
So how do the 2 compare? Aspen has a Market Cap of around R68 billion and Ascendis a mere R400 million. Aspen is now 170 times larger than Ascendis at current valuations.
These are the type of scenarios that I have struggled to wrap my head around. Luckily I have a program that Identifies these changes and adjusts the target price for shares.
I have done a couple of posts on these 2 shares in the past and the last on Aspen can be found here.
So what is the conclusion?
If and/or when there are going to be a Buyout, Takeover, Merger, offer for Remedica, or maybe none of the above will be revealed in due course. Aspen is still the Top share selected by my program and this will probably continue. Ascendis's valuation has changed and I will certainly go with my program on this one. With Aspen changing to the top share by my program a while ago and Ascendis's projected price changing, is it a strange coincidence or are there something else going on.
If you want to read more about me gargling about the valuation of these two companies, you can read it on another forum I posted some time ago here.
What I have learned after my first 13 years (1995-2008) of using value investing as a guideline, is that my valuation and your valuation don't mean diddly-squat when it comes to the share price of a company. The smartest people can do valuations on companies with 10 degrees behind their name, it will still not determine the course of the share price. Even Isaac Newton said "I can calculate the movement of heavenly bodies, but not the madness of people" when he made and lost a fortune on the stock market.
The Stock market is Waaayyyy more complex than everyone thinks, and are not controlled by people with degrees in Finance, or Hedge Funds, or Warren Buffet,
or Governments for that matter. There are factors that can only be monitored and not controlled ..........
and this is where I need to end and a line can not cross.............
Q
And there you have it all nicely in a box. I was going to say hat. But I don't want to be the one eating Your hat. LOL. I have eaten a few of my own. Call it School fees. Thanks. There is an IPO coming from satrix. A new one following an Ishares msci China. I think for now I gonna get that one. Value your output Thanks.
Read more on my previous comment in this post.