THC Global Group Limited

THC Details
 
Full-Spectrum CBD Medicine Now Available for Prescription:THC Global Group Limited (ASX: THC) delivers high quality medicinal cannabis products to Australian patients. Recently, the company updated that its Australian-produced full-spectrum CBD medicine is now available for prescription to Australian patients under Australia’s existing Special Access Schemes. The product falls under the company’s flagship Canndeo brand and has been produced in Australia using cannabis sourced from the Company’s Bundaberg cultivation facility and manufactured at the Company’s Southport Facility.

In another recent update, the company notified about the acquisition of Tetra Health, a leading clinic network in Australia, comprising a network of 600 referring physicians, 30 prescribing physicians and a national network of dispensing pharmacies. The acquisition is expected to occur on or around 25^th May 2020 and involves a total consideration of $2.5 million in THC Shares and $500,000 in cash to be paid to vendors over 6 months, along with 5 million Unlisted Options exercisable at $0.40 expiring two years after issue. After the acquisition, the companies will together pursue expansion opportunities in its current network and will also consider launching in new regions, including New Zealand.

Highlights for the Quarter Ended 31^st March 2020: During Q1FY20, the company reported cash receipts of over $1.2 million, representing yoy growth of 44%, as Australian and Canadian business activities continued without any significant disruption from COVID-19. The company expanded its Southport Manufacturing Facility for in-house commercial scale medicines packaging and distribution. During Q2 and Q3, the company expects revenue from the supply of medicinal cannabis medicines to Australian patients to increase significantly. At the end of the quarter, the company had cash and cash equivalents of ~$2.26 million and reported an operating cash outflow of ~$1.70 million.


Operating Cash Outflow (Source: Company Reports)
 
Stock Recommendation:The stock of the company corrected by 9.59% in the last 3 months and is currently trading close to the average of its 52-week trading range of $0.180 - $0.595. On TTM basis, the stock has an EV/Sales multiple of 9.2x, lower than the industry median (Pharmaceuticals) of 11.9x. The approval for the prescription of the company’s medicinal cannabis product by Australia doctors, represents a key milestone for the business. A larger number of Australian patients will now be able to access medicinal cannabis medicines. Moreover, the company is also progressing towards the expansion of its affordable and accessible TGA GMP medicines range through 2020. Considering the above factors, we give a “Speculative Buy” rating on the stock at the current market price of $0.385, up 16.667% on 21^st May 2020, on account of the recent update regarding prescription of the cannabis product.

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

G Medical Innovations Holdings Limited

GMV Details
 
A Chain of Key Developments:G Medical Innovations Holdings Limited (ASX: GMV) offers a suite of consumer and professional clinical-grade products. The company also offers a professional real-time patient continuous monitoring solution.
FDA Authorisation for Patch:Recently, the company announced that its Vital Signs Monitoring System (VSMS) ECG Patch has received Emergency Use Authorisation (“EUA”) status from the US Food and Drug Administration, for the remote monitoring of the QT interval of an ECG in patients who are undergoing treatment for COVID-19. Prolonged QT intervals outline a rhythm disorder in the heart which can lead to fainting, seizures or sudden death.

Distribution Agreement with US-Based Company: The company reported another key development via signing of a distribution agreement with All County Health Care Inc, to promote and sell Prizma in the US and expand its exposure in the market. Prizma is a unique advanced and medically certified personal monitoring device that offers comprehensive health profiling and monitoring. US represents a key market for the company due to its ageing demographic and size and the agreement is likely to complement the company’s strategy expedite a lucrative market entry.

TGA Approval for G Medical Patch:Another key milestone included the Therapeutics Goods Administration approval for G Medical Extended Holter Patch, as the patch complies with all relevant Australian medical and safety requirements as a Class IIa medical device.

Capital Raising: The company recently completed a placement to raise $6 million through the issue of 85,528,236 fully paid ordinary shares to professional, sophisticated and institutional investors. Proceeds from the issue will be utilised to repay loans, terminate convertibles notes and working capital purposes.

First Quarter Highlights: During the quarter ended 31^st March 2020, receipts from customers amounted to US$1.23 million, with sales generated majorly from remote independent diagnostics testing facility services. Cash used in operating activities amounted to ~US$0.66 million.Revenue for the period decreased slightly on the previous quarter due to COVID-19 related disruptions.
 

Operating Cash Outflow (Source: Company Reports)
 
Stock Recommendation:The stock of the company corrected by 25.45% in the last 1 month and is currently trading below the average of its 52-week trading range of $0.038 - $0.260. The recent authorisation from the FDA represents a significant development for the company in the field of easing the burden of COVID-19 on the US healthcare system. The company is committed to expanding its presence in the US market, as demonstrated by the recent distribution agreement signed with All Country Health Care. Moreover, the recent capital raising represents a key catalyst in the next phase of growth and provides enhanced balance sheet flexibility to capitalise on near-term opportunities.On the valuation front, the stock has an EV/Sales multiple of 8.7x as compared to the industry median (Healthcare) of 2.3x on TTM basis. Although there are numerous positive developments that would ensure better value to shareholders, we presume that the current price level has factored in most of the positive developments. Hence, considering the aforesaid facts and high debt level (~US$10.61 Mn as at 31 December 2019), we have a wait and watch stance on the stock at the current market price of $0.077, down 6.098% on 21st May 2020.
 
GMV Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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