BROKERS’ NOTES: Buy Bidcorp, sell Aspen

Buy: Bidcorp

Bidcorp is a diversified food service group that operates in developed and developing economies on five continents. The businesses operate in South Africa, Europe, the Americas and Australia.

The company is entrepreneurial and operates on a decentralised model, management has enviable depth and experience, and the culture positions the company well for sustained growth.

Bidcorp is a steady grower and a reliable dividend payer.

It is growing at 5% a year in real terms. Management can be commended for sticking to a tried-and-tested formula which delivers organic and acquisitive growth. Bidcorp is constantly making bolt-on acquisitions — eight were concluded during the last reporting period. A purchase in Portugal will increase business there by 40%, and an upgrade to the Rome facility is beginning to bear fruit. Investment in new distribution capacity also continues.

The share is a great currency hedge and should be a cornerstone of any portfolio.

Sell: Aspen Pharmacare

Aspen is a global pharmaceutical company with more than 9,000 employees at 63 offices in over 46 countries.

It markets and manufactures post-patent branded medicines and domestic brands covering both hospital and consumer markets through key business segments.

Manufacturing capabilities cover a range of product types including steriles, oral solid dose, liquids, semi-solids, biologicals and active pharmaceutical ingredients.

The company is subject to headwinds from Chinese volume-based procurement reductions and has to integrate various regional transactions.

It is essentially a commodity business subject to horrible government interventions and price controls.

Over the past five years the share has lost 14% and the company has been a perennial underperformer. It should be sold.