Lithium Australia NL

LIT Details

A Quick Look at September 2020 Quarter: Lithium Australia NL (ASX: LIT) is engaged in the exploration of lithium and other minerals. The market capitalisation of the company stood at ~$52.28 million as on 4^th January 2021. Recently, the company announced that a shareholder has fully paid the balance on 1,000,000 LITCF partly paid ordinary shares in the capital of the Company. The shareholder paid $0.0499 for each LITCF for a total consideration of $49,900. During the quarter ended September 2020, the company’s subsidiary Envirostream Australia Pty Ltd has processed 80 tonnes of lithium-ion batteries. In addition, battery cathode subsidiary VSPC Ltd produced high-quality lithium-ferro-phosphate battery material. LIT finished capital raising of $8.5 million via private placement and shareholder purchase plan. For the year ended 30^th June 2020, the company recorded a loss amounting to $8,662,373 as compared to $11,566,780 in FY19.

Key Financials (Source: Company Reports)

Future Focus: Looking forward, the company would continue to advance its capabilities and operations in recycling.

Stock Recommendation: The company closed September 2020 quarter with cash reserves of $9.2 million. Current ratio of the company stood at 1.85x in FY20 as compared to the industry median of 1.74x, reflecting that the company is well-placed to pay its short-term obligations against the broader industry. The 52-week low-high range for the stock stands at $0.032 - $0.082, respectively. On a technical analysis front, the stock has a support level of ~$0.044 and a resistance level of ~$0.082.  Hence, considering the decent liquidity position, improvement in losses, deleveraged balance sheet and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.063 per share, down by 4.546% on 4^th January 2020.  

LIT Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Note: Lithium Australia Ltd (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

MGC Pharmaceuticals Ltd

MXC Details

Acquisition of Medicinal Cannabis Clinics: MGC Pharmaceuticals Ltd (ASX: MXC) is involved in the production and development of phytocannabinoid-derived medicines. The market capitalisation of the company stood at $44.70 million as on 4^th January 2021. Recently, the company announced that it has started to receive a grant of A$5 million from Malta Enterprise in order to set up a fully functional GMP facility to produce ArtemiC™ in Malta. The company added that the construction of the extension to the MXC Malta facility has been initiated and is expected to be finished in Q2 CY21. Previously, the company finished the 100% acquisition of the operating telehealth clinic business assets, data and intellectual property of Medicinal Cannabis Clinics. The consideration for the acquisition was $1 million MGC Pharma Ordinary Shares and $400,000 in cash is to be made in the coming days.

September 2020 Quarter Update: During September 2020 quarter, the company sold over 7000 units of its proprietary EU GMP cannabinoid-based medicine, which was led by Australia and Brazil. The September 2020 quarter delivered a significant rise in week-on-week unit sales, which continued into mid-October for 6 consecutive record weeks. During the quarter, the company inked agreements with IM Cannabis Corp and LYPHE Group for the distribution of CannEpil® in Israel and Mercury Pharma products in the UK, respectively. During FY20, the company recorded a loss amounting to $19,370,226 as compared to $8,623,856 in FY19

Accumulated Unite Sales (Source: Company Reports)

Outlook: Looking forward, MXC would continue to carry out its policy of improving the prospect of greater returns to its investors via further strategic investments.

Stock Recommendation: The company reached a convertible securities financing agreement with Mercer Street Global Opportunity Fund, LLC, wherein, MXC will have access to financing facility of $15 million, which may provide future growth and generate sales. As on 30^th September 2020, the cash balance of the company stood at $1.064 million. The stock of MXC has provided positive returns of 4.16% and 8.69% in the last one and three months, respectively. On a TTM basis, MXC has an EV/Sales multiple of 9.5x, which is lower than the industry median (Healthcare) of 14.8x. On a technical analysis front, the stock has a support level of ~$0.021 and a resistance level of ~$0.062.  Thus, considering the growth in sales, financing agreement with Mercer, TTM valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.024 per share, down by 4.001% on 4^th January 2021.

MXC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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