Ecofibre Limited

Strong Performance in FY19:Ecofibre Limited (ASX: EOF) is a supplier of hemp and hemp-based products across the United States and Australia. EOF is engaged in Research and Development (R&D) of innovative hemp-based products in textiles and composite materials. The company operates through three segments- nutraceuticals, food and fibre. The principal products and services of each of these operating segments are - Ananda Health, Ananda Food, Hemp Black, andEcofibre Corporate.The company has collaboration with Thomas Jefferson University (TJU) in the United States. The company was listed on ASX as on 29 March 2019.

With a recent update on ASX, EOF appointed David W. Neu as the Executive Chairman of Ananda Health, its US Nutraceuticals business. Formerly, David served as the President of AmerisourceBergen Drug Corporation (NYSE: ABC) and Good Neighbor Pharmacy.

FY19 Performance Highlights:The company posted a stellar set of numbers for FY19 as top-line grew by whopping 519% at $35.6 million. This exuberant growth was followed by gross profit at $25.8 million with a growth of 1211% on y-o-y basis. EBITDA in FY19 was up by 181% at $5.9 million against an EBITDA loss of $7.3 million a year ago. Net profit after tax during the year came at $6 million, posting a yoy growth of ~170%. Cash balance stood at $25.7 million, followed by intangibles at $0.3 million at the end of FY19. Property, plant & equipment (PP&E) stood at $6.7 million from $2.7 million during the end of FY18. Net assets of the company at the end of 30^st June 2019 stood at $42.3 million.


FY19 Financial Performance (Source: Company Reports)
 
 

FY19 Financial Performance (Source: Company Reports)

Outlook: TheManagement guided for strong growth in FY20 from ‘Ananda health’ segment. EOF has concluded that the targeted consumer for these products is enormous, and the company is ready to achieve multiples of FY19 sales.From the regulatory point of view, the environment seems to be stable as the hemp and hemp-based products enjoy bi-partisan US support.

For ‘Ananda Food’ segment, the Management has guided steady sales growth well supported by quality clients. The business is likely to deliver its initial profits on account of increasing awareness of hemp as high-quality food. The company has adequate infrastructure to support higher growth and scale benefits.

‘Hemp Black’ will begin early commercialisation after the infrastructure is ready. Management is confident about the long-term outlook for the segment.

Stock recommendation:On 13^th August 2019, the stock of EOF closed at A$2.910, with the market capitalisation of ~$931.14 million. 52-week trading range for the stock stands at A$1.450 - A$3.700. The stock has recently listed on ASX and gained ~57.59% in last three months. Considering the excellent results for FY19 along with the movement in stock price in the recent past, we are of the view that most of the positive factors are already discounted at the current level. Hence, we have a wait and watch stance on the stock at the current market price of $2.910, down 3.322% on 13 August 2019 from the previous trading session, suggest that investors should wait for a few more catalysts that may drive the stock.
 

Creso Pharma Limited

CPH to be Acquired by PharmaCielo Ltd:Creso Pharma Limited (ASX: CPH) develops, register and commercialise pharmaceutical-grade cannabis and hemp-based nutraceutical products and treatments.

Strategic distribution alliance with JC Logistics Ltd t/a Medleaf Therapeutics:With a recent press release, CPH announced its exclusive distribution agreement with JC Logistics Ltd t/a Medleaf Therapeutics. The deal stated about the exclusive distribution of Creso’s cannaQIX® 50 and 10% CBD Oil till 31^st December 2022 in New Zealand by Medleaf. The Agreement includes purchase targets and along with this, CPH can terminate the deal by giving 6 months’ notice depending on the performance of JC Logistics Ltd t/a Medleaf Therapeutics. 

Acquisition of CPH by PharmaCielo Ltd: With an update on 7 June 2019, CPH announced of signing an agreement with PharmaCielo Limited (TSXV: PCLO), a Canadian entity. As per the deal, CPH will be acquired by PCLO.  

PharmaCielo, is a fully licensed producer of medicinal cannabis oil products in Colombia with the market capitalisation of ~CAD675 million and is listed on Canada’s TSX Venture Exchange. As per the deal, CPH will receive business guidance from experience management team of PCLO. Further, PCLO will get a dual license of cultivation and processing facilities across Canada and Colombia. Management expects the above alliance will provide high-grade medicinal cannabis materials to multiple global markets.

The above development is a strong strategic move for both the companies with respect to the geographical reach for the distribution and marketing of the products. As per the deal, the shareholder of CPH will receive 0.0775 PCLO shares for each Creso Pharma share held representing an offer price of AUD$0.63 per Creso Pharma share.

 FY18 Financial highlights:During FY18, CPH posted revenue of $5,58,382, with posting a yoy growth of 136%. EBITDA stood at -$16,730,515 down by 11%. The company posted a loss of $16,845,686 during FY18.


FY18 Financial Performance (Source: Company Reports)

Stock Recommendation: At the current market price of $0.445, the stock of CPH is trading at P/BV of 4.1x against the 4.2x of industry median. With the acquisition update, we suggest investors to keep a close watch on the stock at the current market price of $0.445, down 1.111% as on 13^th August 2019.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.