Ecofibre Limited

Appointment of Chairman: Ecofibre Limited (ASX: EOF) is engaged in breeding, growing, processing and distribution of hemp products. The company recently announced that it has appointed David W. Neu as the Executive Chairman of its US Nutraceuticals business, Ananda Health. Formerly, he has worked with organisations like AmerisourceBergen Drug Corporation and Good Neighbor Pharmacy.

Overview of FY19 Results: During the year ended 30 June 2019, the company reported revenue amounting to $35.6 million, up 519% in comparison to the prior year’s revenue of $5.7 million.Approximately 70% of the revenue during the year was sourced from US independent pharmacies. Ananda branded products accounted for 84% of the company’s sales during the period.

Profit before tax for the year was reported at $4.6 million, up 156% on the prior corresponding period loss of $8.2 million.Net profit after tax for the period stood at $6.0 million, up 170% in comparison to FY18 Net loss after tax of $8.6 million. The company also reported a fully diluted EPS amounting to 2.2 cents per share, increased by 159% in comparison to 3.7 cents loss in FY18. The following picture provides a brief overview of the key financial numbers of the company in FY 2019:

FY19 Income Statement (Source: Company Reports)

Outlook: The company expects Ananda Health to continue to experience strong quality growth. The company also stated that the regulatory environment is favourable and there are expectations that it would remain stable.Ananda Food is expected to see steady sales growth underpinned by quality clients. In addition, it was stated that the Hemp Black would begin the early commercialisation.

Stock Recommendation: The stock of the company generated returns of 32.56% over a period of 3 months, respectively.During FY19, the company maintained a strong balance sheet position with low debt, providing a low risk scenario. Despite the decent performance in FY19, the company has not provided detailed financial outlook guidance as it is currently undergoing rapid growth in developing industries and believes that any guidance during this period may be misleading for its stakeholders. Currently, the stock is priced slightly towards its 52-week high level of $3.70. Hence, considering the high returns since inception (29 March 2019) and current trading levels, we put our watch stance on the stock at the current market price of $2.820, down 1.053% on 28 August 2019 and suggest investors to wait for better entry levels.
 

Medlab Clinical Limited

Progress on Product Performance:Medlab Clinical Limited (ASX: MDC) is primarily engaged in the sale of nutraceutical products and pharmaceutical research and commercialisation. The company recently notified that it has completed the phase 1 trial of NanaBidial™. As per the results of the study, NanaBidial™ provedto be safe and positive for absorption and metabolism in a healthy human cohort.

Expansion in the USA: The company provided an update regarding a Heads of Agreement with American Nutritional Corp Inc for entry into the US market using its existing nutraceuticals.The agreement will allow entry of the company’s products into both medical and consumer markets. First US launch of the products is expected to take place in or around December 2019.

June Quarter Update: During the quarter, the company generated revenue of more than $3 million, witnessing more than 140% growth over the prior corresponding period. Collections for the quarter were reported at $2.589 million, increasing approximately 170% over the March quarter. As at 30 June 2019, the company has a cash balance of $11.442 million.

Product Update: During the quarter, the company reported favourable early results from stage 2 of advanced cancer pain trial. In addition, it received Human Ethics Approval for a second NanaBis™ trial. During the quarter, the company completed research and development for a third medical cannabis product, NanoCBD™, which is expected to be available in the global markets by the start of 2020.


Key Findings (Source: Company Reports)
 
Stock Recommendation: The company’s stock generated returns of 23.68% over a period of 6 months. During the quarter ended 30 June 2019, the company achieved record collections and quarterly revenue. Thecompany progressed well on its research programme in chronic diseases, including cancer pain and depression, representing significant earning opportunities globally. In the report, it was also stated that MDC has opened its second Sydney premises, which solely feeds Australia pharmacy wholesalers from 1 single point. Through the HoA signed with ANC, the company has an opportunity to extend its offerings to ANC clients and rapidly expand its nutraceutical business in the USA. As per the Australian Securities Exchange, the stock of Medlab Clinical Limited is trading slightly above the 52-week high and low levels of $0.560 and $0.340, respectively. Based on the above factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.465 per share (down 1.064% on 28 August 2019).

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