Stocks’ Details

Medlab Clinical Limited

Execution of Heads of Agreement: Medlab Clinical Limited (ASX: MDC) is into the sale of nutraceutical products as well as pharmaceutical research and commercialisation. The market capitalisation of the company stood at ~A$111.99 Mn as on 5^th August 2019. The company with the help of release updated the market that it has inked a Heads of Agreement to make an entry in the US using its existing nutraceuticals with American Nutritional Corp Inc (or ANC). It was also mentioned that several of the company’s current, unique nutraceuticals are well placed for ANC clients. The deal between MDC and ANC should witness the entry of the MDC’s products in medical and consumer markets with larger, existing companies already strong in branding and distribution in the near term. However, the finalisation of Commercial terms and specific distribution partners are to be done via the execution of a definitive commercial agreement. Additionally, the key nutraceutical products of interest include the company’s heavily researched NanoCelle™ delivery platform, NRGBiotic™, which is currently used in ongoing Depression trials at QUT and MultiBiotic™.

In the June 2019 quarter, the company reported revenues in excess of $3 Mn, reflecting a growth of more than 140% over the pcp and reported collections of $2.589 Mn with a rise of around 170% over the March quarter.The net cash used in the operating activities stood at A$3.001 Mn in June 2019 quarter.


Cash Flow Statement (Source: Company Reports)

What to Expect: With respect to research, the company continues to move forward its research driven agenda with significant gains in both core product categories. It is also focused on chronic disease markets, which includes pain management and depression, where global markets represent significant earnings opportunities.

Stock Recommendation: The company reported a gross margin of 65.6% in 1H FY19, reflecting YoY growth of 5.5%. The current ratio of the company stood at 9.90x in 1H FY19 against the industry median of 4.55x, which represents that MDC is well-positioned to meet its short-term obligations. The debt to equity ratio of the company stood at 0.01x in 1H FY19 in comparison to the industry median of 0.25x. 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$0.500 (down 3.846% on 5^th August 2019).
 

AusCann Group Holdings Ltd

A Look at June 2019 Quarter: AusCann Group Holdings Ltd (ASX: AC8) is a manufacturer and supplier of medical cannabis products. The market capitalisation of the company stood at ~A$136.33 Mn as on 5^th August 2019. Recently, the company, via a release updated the market with June 2019 quarter performance. The company stated that from 22^nd May 2019, Mr Ido Kanyon commenced as new Chief Executive Officer of AC8. On the operational front, the company added that they undertook numerous activities during the June 2019 quarter in order to progress from product development to commercialisation.

After the June 2019 quarter end, the company has inked a New supply agreement with TasAlk (Tasmanian Alkaloids) for the purchase of cannabis resin, which is in accordance with AC8’s strategy to de-risk supply chain and to secure high-quality pharmaceutical suppliers throughout the product value chain. The following picture provides an overview of the company’s net cash used in operating activities:


Cash Flow Statement (Source: Company Reports)

Future Aspect: The company’s strategy revolves around developing and producing cannabinoid pharmaceuticals which address the medical needs of doctors and their patients. It is planning to continue to diversify and increase cannabis raw material supply base. It is also planning to progress the development of new AusCann R&D facility in WA. The company is also focused on disciplined capital management.

Stock Recommendation: The company reported asset to equity ratio of 1.01x in 1H FY19 against the industry median of 1.86x. The current ratio of AC8 stood at 73.29x in 1H FY19 as compared to the industry median of 1.94x, which represents that AusCann Group Holdings Ltd is in a good position to address its short-term obligation against the peer group. The respectable liquidity levels also provide headroom to make deployments towards business objectives.  Currently, the company’s stock is trading below the average of 52 weeks high and low price of $0.295 and $1.165, respectively. Hence, considering the above-stated facts and current trading levels, we maintain our “Hold” rating on the stock at the current market price of A$0.425 per share (down 1.163% on 5^th August 2019).  
 

Elixinol Global Limited

Feasible Growth in Revenue: Elixinol Global Limited (ASX: EXL) is into the manufacturing and distribution of industrial hemp products. The market capitalisation of the company stood at ~A$427.47 million as on 5^th August 2019. Recently, the company, with the help of a release updated the market about the operational and financial performance of Q2 FY19.  In the quarter ending 30^th June 2019, the group revenue stood at $9.9 Mn, reflecting the growth of 19% in comparison to $8.3 Mn of Q2 FY18. During the quarter, the company continued investment in key areas of the business for pursuing its growth strategy and to increase its distribution of branded products. The company acquired a 25% interest in Pet Releaf, which is the US-based leading brand in the high growth cannabidiol (CBD) pet products market. It was also mentioned in the release that Elixinol Global raised an amount of $50 Mn to accelerate the US expansion.


Revenue Growth (Source: Company Reports)

Future Prospects: The company’s global investment into top-line growth is on track. For FY19, it is planning to become a top 5 CBD business in Europe, and it is also planning to substantially grow group’s top-line revenues in consumer CBD products. For FY20, it is planning to expand vertically further integrated CBD production capacity in the US and other countries.

Stock Recommendation: The gross margin of the company stood at 54.3% in FY18 and posted a current ratio of 7.91x in FY18. With respect to the stock’s past performance, it generated negative returns of 16.22% and 27.06% in the time span of one month and three months, respectively. Based on the foregoing, we have a wait and watch view on the stock at the current market price of A$2.840 per share (down 8.387% on 5^th August 2019).


Comparative Price Chart (Source: Thomson Reuters) 

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