Stocks’ Details

AusCann Group Holdings Ltd

A Look at Preliminary Final Report: AusCann Group Holdings Ltd (ASX: AC8) is engaged into the cultivation, manufacturing and supply of medical cannabis products. It has a market capitalisation of A$118.89 Mn as on 3^rd September 2019. Recently, the company released its preliminary financial report for the year ended 30^th June 2019. In the report, the company stated that Ms Elaine Darby stepped down as Managing Director and it has appointed Mr Ido Kanyon as Chief Executive officer to guide the company. The company recorded a rise of 267% to $ 1,532,376 in revenues from ordinary activities and posted a net loss attributable to members amounting to $7,649,221, reflecting a decline of 2% against the prior year.

Financial Results (Source: Company Reports)

What to Expect: The company mentioned that it had made a substantial progress during the year on its aim to become a leading pharmaceutical company focused on the development and commercialisation of cannabinoid-based medicines. AC8 remained focused on advancing the development of its first product line. The company is targeting to provide patients with improved health outcomes and quality of life, with first product anticipated to be released for clinical trials towards the end of 2019.

Stock Recommendation: AusCann Group Holdings Ltd remains well-financed to execute on its strategy as a result of successfully completing a capital raising of $33.4 Mn through a share placement in the month of July 2018, and a further $1.9 Mn via a share purchase plan in August 2018. On the stock performance front, it provided a return of 7.14% in the time period of three months. Hence, considering the above-stated facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of A$0.365 per share (down 2.667% on 3^rd September 2019).
 

Cann Group Limited

Projection of Revenues from Increased Capacity: Cann Group Limited (ASX: CAN) is involved into the cultivation of medicinal cannabis for medicinal and research purposes. It has a market capitalisation of ~A$260.92 Mn as on 3^rd September 2019. As per the release dated 27^th August 2019, the company announced that an amended design for its large-scale state-of-the-art greenhouse facility in Mildura would be increasing the full production capacity of the facility by 40% to 70,000 kg of dry flower per annum. It added that, from the increased capacity of Mildura facility, there are expectations that the company would be able to generate annual revenues in the range of around $220 Mn-$280 Mn based on the current wholesale price of cannabis dry flower. During the year 2019, the company continued to execute on its growth strategy and consolidated its position as Australia’s leading medicinal cannabis company. The following picture provides an overview of FY19 results of the company:

Financial Results for FY19 (Source: Company Reports)

Future Aspects: Cann Group Limited expects to commence exports under the supply and offtake agreements with Aurora Cannabis. The company would continue progression towards the establishment of its third-party GMP product manufacturing capability with IDT, enabling production of value-added formulations which can be supplied to Australian patients, and under the offtake agreement with Aurora.  

Stock Recommendation: The current ratio of the company stood at 10.74x in FY19, which is higher than the industry median of 1.92x, which represents that CAN is in a decent position to meet its short-term obligations as compared to the broader industry. Additionally, it can be said that the decent liquidity levels might help the company in making deployments towards the key business activities. The company reported an asset to equity ratio of 1.06x in FY19 against the industry median of 1.64x. As per ASX, the stock of Cann Group Limited is trading lower than its 52-week low high average. Hence considering the aforesaid facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$1.830 per share (down 0.543% on 3^rd September 2019).
 

Althea Group Holdings Limited

Strong Top-line Growth in FY19: Althea Group Holdings Limited (ASX: AGH) is engaged into the sales and distribution of medicinal cannabis products along with the development of a manufacturing and cultivation facility. The market capitalisation of the company stood at ~A$189.98 Mn as on 3^rd September 2019. Recently, the company with the help of a release announced that Mr Joshua Michael Fegan made a change to his holdings in the company by acquiring 12,750 ordinary shares at the consideration of $10,036.27 on 26^th August 2019. In FY19, the company reported revenues from the ordinary activities amounting to $0.767 Mn, reflecting a significant rise of 6,872.7% on YoY basis. The company further stated that during FY19, around 10% of the consolidated entity's external revenue was derived from sales to one customer.

As per the release dated 7^th August 2019, the company has reached 1,523 patients which have been prescribed Althea medicinal cannabis products in Australia, with 245 Healthcare Professionals having prescribed Althea medicinal cannabis.It was also mentioned that the company has entered into an agreement with Tetra Health Pty Ltd in order to support continued growth through the secondary clinic channels. Under the agreement, Tetra Health will assist the company as a non-exclusive education and distribution partner of its medicinal cannabis products in Australia.


Financial Summary (Source: Company Reports)

Future Prospect: The company is focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing returns on assets as well as focusing the executive on key non-financial drivers of value. The company’s focus on patient care underpins its business strategy.

Stock Recommendation: AGH was established to cultivate, produce and supply medicinal cannabis for the eligible patients throughout Australia. The consolidated entity has formed strategic partnerships and devised a three-stage business model built upon early revenue generation, sales-driven growth and scalable domestic production. Coming to the stock performance, it delivered returns of 11.49% and 106.25% in the time span of three months and six months, respectively. Hence, considering the aforesaid facts coupled with decent returns in the recent past, and current trading levels, we have a wait and watch view on the stock at the current market price of A$0.770 per share (down 5.521% on 3rd September 2019).


Comparative Price Chart (Source: Thomson Reuters) 

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