Buy: Discovery
Discovery has finally got into its groove. Founder Adrian Gore’s long-held dream of providing a full circle of services to one client, spanning health, life, short-term insurance, banking and Vitality, has materialised. After years of heavy investment, particularly in Discovery Bank, the group is now firmly in the harvest phase. In financial 2026, normalised operating profit rose 17%, normalised headline earnings increased 21%, and headline earnings grew 33% to R19.26 per share. Both major composites performed well, with Discovery South Africa up 16% and Vitality up 21%. The bank was the standout, swinging from a R68m loss to a R370m profit as revenue rose 31%, clients 26% and advances 40%. Vitality increased profit by 60%, while Discovery Insure grew 24%. Cash conversion strengthened to 85%, and management now expects operating profit growth towards the upper half of its 15%–20% target range. The investment years are bearing fruit. Discovery is a buy from here.
Sell: Aspen Pharmacare
Aspen has repeatedly changed shape, buying and selling businesses and leaving investors struggling to identify a dependable earnings base. After a difficult period, the portfolio now appears better positioned. In financial 2026, revenue declined 1.4% to R34.8bn following the Aspen Asia Pacific disposal, but restructuring benefits lifted normalised ebitda 10% to R7.7bn. The quality of earnings remains debatable: unadjusted headline earnings fell 15% to 343c per share. The manufacturing division remained loss-making. Mounjaro performed strongly, but sales in the over-the-counter and prescription segments disappointed. There are positives. Aspen is near net cash, management is sensibly prioritising buybacks over acquisitions, finance costs should fall by about R1.5bn, and reported headline earnings could almost triple to 878c per share in financial 2027. But at 16.8 times forward earnings, the share already prices in a substantial recovery. Aspen may have removed many of its portfolio gremlins, but historically poor returns, limited visibility and mixed execution mean that the market must see sustained delivery. Share price upside looks limited in the short term.
Armitage is the CEO of Anchor Capital
