Stocks’ Details
 

AusCann Group Holdings Limited

Appointment to the Board:AusCann Group Holdings Limited (ASX: AC8) is engaged in cultivation, manufacturing and supply of medical cannabis products. The market capitalisation of the company stood at A$69.75 Mn as on 24^th December 2019. Recently, the company announced that it has appointed Mr Max Johnston and Mrs Krista Bates as Non-Executive Directors of AusCann. Also, the company has issued 1,527,200 performance rights under the Employee Securities Incentive Plan to certain employees of the company. 

In another update, the company announced that manufacturing and testing of its proprietary cannabinoid-based hard-shell capsules has been wrapped up and released the hard-shell capsules for clinical evaluation.As per the key personnel, the company’s September quarter witnessed important progress as it approaches completion of the key milestones. The following picture provides an idea of the net cash used in operating activities for the quarter ended September 30, 2019:


Net Cash Used in Operating Activities (Source: Company Reports)

Outlook:The focus of the company is on the provision of high-quality, economical and clinically validated cannabis medicines. In the near-term, the emphasis is towards progressing development and commercialisation of the hard-shell capsules.

Stock Recommendation:The company’s target is to provide high-quality medicine as well as to obtain detailed, data-driven evaluations in relation to the results of the company’s pharmaceutical treatment. Current ratio stood at 29.74x in FY19 as compared to the industry median of 1.90x. This reflects that the company is in a sound position to address its short-term obligations against the industry. On the valuation front, the stock is trading at a price to book value multiple of 1.7x against the industry average (Healthcare) of 3.7x on a TTM basis. Thus, considering the recent release of hard-shell capsules for clinical evaluation and decent liquidity levels, business prospects and valuation, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.225 per share, up 2.273% on 24 December 2019.


AC8 Daily Technical Chart (Source: Thomson Reuters)
 

Medlab Clinical Limited

Completion of Placement:Medlab Clinical Limited (ASX: MDC) is engaged in the research and development of nutritional pharmaceutical. The market capitalisation of the company stood at A$71.13 Mn as on 24^th December 2019. The company, through a release dated 16^th December 2019, announced that it has successfully completed a share placement, which was oversubscribed with 17,857,143 ordinary shares placed to institutional as well as sophisticated investors in Australia. The company raised $5.00 million before costs as a result of the placement. It was also mentioned in the release that the funds will be deployed to address its short-term goals as it prepares for Phase 3 research of its NanaBis™ drug candidate program. As at 30^th September 2019, the cash balance of the company stood at $6.942 Mn. However, with the receipt of $2.1 Mn in relation to the R&D Tax Incentive Scheme for FY 2019, the cash position of the company was improved in October.


Net Cash Used in Operating Activities in September 2019 Quarter (Source: Company Reports)

Global Commercial Opportunity:The company is committed for delivering significant advancements in pain management with global commercial opportunities. The company expects to deliver significant news with respect to progress on throughout its businesses and opportunities for the customers, staff and its shareholders.

Stock Recommendation:To define drug registration pathways for the purpose of near future new drug applications, the company has engaged European Medicines Agency in Europe, the Food and Drug Administration in the USA and Therapeutic Goods Administration in Australia. Debt to equity multiple stood at 0.06x in FY19 against the industry median of 0.19x. Asset to equity stood at 1.34x in FY19 as compared to the industry median of 1.46x. MDC has EV/Sales multiple of 7.8x in comparison to the industry median (Healthcare) of 8.2x on TTM basis. The stock is trading at a price to book value multiple of 4.4x as compared to the industry average (Biotechnology & Medical Research) of 6.1x on TTM basis.

Thus, in light of decent valuations, outlook, and favorable valuations, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.300 per share, down 1.639% on 24^th December 2019.


MDC Daily Technical Chart (Source: Thomson Reuters)
 

THC Global Group Limited

Exercise of Options: THC Global Group Limited (ASX: THC) is a farm to pharma diversified, vertically integrated cannabis company, with a market capitalisation of A$52.85 Mn as on 24^th December 2019. Recently, the company announced that the Chairman, Steven Xu, and Deputy Chairman named Alan Beasley, each has applied for the exercise of their options, exercisable at $0.40, and will expire on 31^st December 2019. Also, the company has appointed Ms Angela Macquire as Chief Operating Officer of THC Pharma Pty Ltd, which happens to be the cannabis extraction and manufacturing division of the company operating the Southport Facility.

At the end of September 2019 quarter, the cash balance of the company stood at $4.02 Mn. Also, the company has received repayment of an employee loan amounting to $1.1 Mn in October 2019, which would be recognised in Q4 FY 2019.   


Overview of Cash used in Operating Activities (Source: Company Reports)

Committed Toward Product Validation:The company is committed to complete product validation at its Southport Manufacturing Facility by the end of December 2019, allowing commencement of supply of Australian medicinal cannabis to Australian patients in early 2020.

Stock Recommendation:Current ratio stood at 8.71x in 1H FY 2019 as compared to the industry median of 1.66x, reflecting the company’s decent liquidity position for addressing short-term obligations as compared to the peer group. Debt to equity stood at 0.02x in 1H FY 2019 in comparison to the industry median of 0.15x. On the valuation front, the stock is trading at a price to book value multiple of 2.0x against the industry average (Industrials) of 3.4x on TTM basis. Hence, considering the stable balance sheet and decent liquidity position, we give a “Speculative Buy” rating on the stock at the current market price of A$0.380 per share, down 1.299% on 24^th December 2019. 
 
 
THC Daily Technical Chart (Source: Thomson Reuters)

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