AusCann Group Holdings Ltd

AC8 Details

Decent Cash Position: AusCann Group Holdings Ltd.’s (ASX: AC8)shares tumbled 2.691 per cent on July 12, 2018 as there might be some profit booking after several positive updates such as the group successfully raised A$33.4 Mn through a share placement from North America and Australia; received green signal for the exportation of cannabis-based products from the Federal government, strategic partnerships to support the core business, etc.

AC8 is a leading company in the emerging cannabis industry with the market capitalization of $308.71 Mn (as at July 12, 2018) and the group has integrated its operations throughout the entire medical cannabis supply chain via several partnerships. On the financial front, AC8 posted an increase in its net sales to $129,128 in 1HFY18 as compared to the prior corresponding period (pcp). However, the loss from the ordinary activity increased by 261 per cent to $ 4,829,822 in 1HFY18 as compared to $ 1,338,257 in 1HFY17.  This was primarily due to rise in non-cash share-based payments. Additionally, AC8 reported cash reserves of $11.89 Mn as at 31 March 2018 and is well funded to maintain its operational momentum in Q4FY18 and beyond. At present, the company enjoys its cash-rich position with nil debt facility. The current ratio substantially increased from 0.96x to 42.03 in 1HFY18 from the prior corresponding period. Further, the company has made a strong start to the second half of the financial year with the singing of several agreements to distribute its product mix across the regions.


Integrated Business Model (Source: Company Reports)
 
Based on foregoing, we expect that the company has a decent outlook in the long run. With a year to date rise of 38.51 per cent as at July 11, 2018, it might be good to “Hold” the stock at the current market price of $ 1.085.
 

AC8 Daily Chart (Source: Thomson Reuters)
 

The Hydroponics Company Ltd

THC Details

Update on Board Appointment: The Hydroponics Company Ltd (ASX: THC) has received an independent market valuation for its recently acquired pharmaceutical manufacturing facility in Queensland, Australia. According to the release, the company had revalued its Southport pharmaceutical manufacturing facility by $14.58 Mn at market value underpinned by an unmatched domestic manufacturing capability. With the combination of land and building at acquisition price, the combined value will be recognized in THC’s June 2018 half-yearly accounts at $16.68 Mn to its balance sheet. Moreover, the company has secured significant growing capacity, imported products for Australian patients, export and off-take agreements in final stage negotiations, and international commercial partnerships. As a result, the company has made a clear path to generate revenue from medicinal cannabis business in the near term, with the ability to service domestic patients and export into other markets.

Recently, the group appointed Ken Charteris to the Board as a Group CEO of the company, effective from 11 July 2018 with the objective of leading THC’s global corporate strategy, and focussing on the build-out of the Company’s medicinal cannabis business which has attracted global commercial partners and secured significant growing capacity combined with an industry-leading pharmaceuticals manufacturing facility, as well as THC’s global hydroponics business.  Moreover, Mr. Gary John Radcliff who had an Indirect interest in the company acquired 38,616 FPO through the on-market purchase with the total consideration of $23,369.60. Meanwhile, the share price has fallen 35.56 per cent in the past six months and trading near to mid of 52-week price levels. In view of further growth expected from its efforts, we give a “Hold” recommendation on the stock at the current market price of $ 0.555 (down 4.31 per cent on July 12, 2018).
 

THC Daily Chart (Source: Thomson Reuters)
 

Cann Group Ltd

CAN Details

Positive Outlook:Cann Group Ltd (ASX: CAN) has bright future as they are in progress with the site selection for its Stage 3 cultivation and GMP (Good Manufacturing Practise) manufacturing hub facility. Moreover, the final design will be dependent of the site selected, but is expected to be around 23,500 metre square, with some 14,000 metre square flowering room capacity. Besides this, the group has signed a head of agreement with Australia Pacific Airports (Melbourne) Pty Ltd with the objective of securing the site of Cann’s proposed Stage 3 medicinal cannabis cultivation and GMP manufacturing facility. On the financial front, the current ratio and quick ratio substantially increased from 28.66x and 28.60x to 58.48x and 57.98x, respectively in the six months as at 31 December 2017. Since listing on the ASX in May 2017 at an IPO of $0.30 per share, CAN’s shares price has performed strongly and rewarded its investors (up 428.6% in last one year). Given the positive outlook of medical cannabis sector supported by the regulatory bodies, synergistic investment into the business to strengthen its organic growth, healthy balance sheet and availability at a low price, we give a “Buy” recommendation on the stock at the current market price of $2.910 (slipped by 1.689 per cent on July 12, 2018).
 

CAN Daily Chart (Source: Thomson Reuters)

 
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