Ecofibre Limited

EOF Details

H1FY21 Result Highlights: Ecofibre Limited (ASX: EOF) operates in the hemp industry in the US and Australia through its subsidiaries. Its segments include nutraceuticals, food, and fiber. For H1FY21, the company reported total revenue of $14.67 million, down by 49% on pcp. Further, the company has reported a net loss of $5.5 million in H1FY21, against the profit of $7.07 million in H1FY20. Over the period, Ananda Food expanded clients to work towards scale benefits and registered a 61% increase in revenues on pcp basis. Ananda Food is reducing its variable costs through ongoing yield improvements and owning genetics. The company ended the period with a cash balance of $13.5 million.

Profits and Revenue Trend (Source: Company Reports) 

Outlook: Ananda Health may witness disrupted trading in near-term due to COVID testing and vaccinations. Hemp Black and Ananda Food are likely to see growth through their established customer base. EOF is expecting a loss of $1.5mn in 2HFY21, leading to a total loss of ~$7mn for FY21.

Stock Recommendation: In the last 1 month, the stock of EOF has corrected by 18.91% and is currently trading below the average 52-week price level range of $1.240-$3.210. On the technical analysis front, the stock has a support level of ~$1.26 and resistance of ~$1.849. On a TTM basis, the stock is trading at a price to book multiple of 2.0x, higher than the industry median of 1.6x. Considering the decline in the company’s top-line and bottom-line, increased operating expenses, valuation on TTM basis, and associated key risks, we give an “Avoid” rating on the stock at the current market price of $1.565 as on 18 Feb 2021.

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

Neuren Pharmaceuticals Limited 

NEU Details

Prader-Willi syndrome added to NEU’s Pipeline: Neuren Pharmaceuticals Limited (ASX: NEU) is a biopharmaceutical company engaged in developing drugs for neurological disorders. The Company develops therapies for brain injury, neurodevelopmental and neurodegenerative disorders. With an addition of Prader-Willi Syndrome to NEU’s pipeline for NNZ-2591, the company has witnessed a compelling effect of treatment. As per the company reports, behaviorial deficits and problems such as obesity and excessive insulin were reduced to normal.

Change in Director’s Interest: Patrick Davies, director at NEU has acquired an additional 35,211 ordinary shares on 17 February 2021 to reach at total shareholding of 206,306 shares.

December 2020 Quarter Highlights: During the quarter, the company advanced the treatments for five serious conditions that emerge in childhood and have no approved medicines. NEU has utilized $1.6mn in its operational activities with R&D expenses of $1.1mn incurred on NNZ-2591 non-clinical studies. At the end of December 2020, the company had a cash balance of $24.1 million. 

Cash Flow from Operating Activities Ending December 2020 (Source: Company Reports)

Outlook: NEU is exploring options with potential partners for markets in Asia. NEU is also planning to initiate Phase 2 trials of its second drug candidate NNZ-2591 in 2021.

Stock Recommendation: In the last 1 month, the stock of NEU has corrected by 4.82%. The stock is currently trading below the average 52-week range of $0.965-$2.820. On the technical analysis front, the stock has a support level of ~$1.257 and resistance of ~$1.528. On a TTM basis, the stock is trading at a price to book value multiple of 17.2x, higher than the industry median of 7.5x. Considering the company’s negative bottom line, negative ROE, higher R&D expenses, and valuation on TTM basis, we give an “Avoid” rating on the stock at the current market price of $1.38, up by 1.098% as on 18 Feb 2021.

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

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