4 Small cap stocks under the radar – MDC, AHF, LOM and VTI

Stocks’ Details
 

Medlab Clinical Ltd

Progress to date on the pain management product, Nanabis: Medlab Clinical Ltd.’s (ASX: MDC) stock rose 1.7% on April 27, 2018. MDC stock has been lately added to All Ordinaries, effective from March 19, 2018 as per March 2018 Quarterly Rebalance of the S&P/ASX Indices. On the other hand, MDC’s progress to date on the pain management product, Nanabis (cannabis plant extract) is in line with the company’s plan. Therefore, MDC has commenced medical Education Seminars in Sydney and more will follow. The first batch of Nanabis product has been manufactured by PPP in Melbourne and validated analytical release for supply was expected by 8th March 2018. The Australian Government through the “Office of Drug Control (ODC)” has formally licenced Medlab as a supplier of Nanabis. Further, once the “validated release” of the manufactured Nanabis product is achieved, MDC will be in a position to supply a drug that conforms to Australian standards for a Schedule 8 medicine. Meanwhile, MDC stock has fallen 43.81% in three months as on April 26, 2018 and there is an entry opportunity. In the first half of 2018, MDC’s loss of the consolidated group after income tax and non-controlling interest widened to $2,269,323 compared to $1,704,884 in the first half of 2017 partly based on research related efforts. The group has otherwise completed capital raising for funding its activities, and has about $21.3 million as cash and deposit as at March 2018. Out of 14 patent applications, 6 have been granted as patents while 3 are pending and remaining stay as filed. In view of the risk and reward situation, we give a “Speculative Buy” recommendation on the stock at the current price of $ 0.600.
 

Wide range of products (Source: Company Reports)
 

Australian Dairy Farms Group

AHF’s subsidiary signed significant new contract processing agreement with an international food company: Australian Dairy Farms Group’s (ASX: AHF) stock plunged 4.65% on April 27, 2018 which may be partly owing to some profit booking and volatility. Meanwhile, AHF’s subsidiary Camperdown Dairy Company has signed a significant new contract processing agreement with an international food company. This is a new material multiyear contract and is expected to exceed $30 Million sales in the first 4 years of production. The expectations are based on detailed estimates of unit sales per store, number of products being ranged, and number of stores ranging the products in Australia, along with consideration for prices and volumes of sales for the same products in other markets where the products have been launched. Moreover, the products, that are new to the Australian market, are scheduled to be launched in Australia during July/August 2018 and will be through a major Australian retail supermarket chain which is strongly supporting the products being introduced in Australia and widely ranged. Further, 2018-2019 volumes are expected to exceed Camperdown’s current production capacity for this product segment. AHF is commencing capacity expansion immediately for the product segment. However, due to non-disclosure agreements in place in relation to the marketing launch of these products, which are to be progressively distributed nationally, AHF and Camperdown Dairy are prohibited from disclosing the identity of the brands or retailer until after the marketing launch. Meanwhile, AHF stock has risen 72% in three months as on April 26, 2018. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $ 0.205, while speculation on capital raise along with details on the new contract are being discussed.
 

Lucapa Diamond Co Ltd

Settled the allotment of 30,434,782 fully paid ordinary shares: Metal and mining company, Lucapa Diamond Co Ltd.’s (ASX: LOM) stock rose a bit after the company settled the allotment of 30,434,782 fully paid ordinary shares at $0.23 per share, which represents Tranche 1 of the A$16.5 million placement of shares. Moreover, LOM has planned to launch a buy-back of unmarketable share parcels. LOM has established a share sale facility for individual LOM shareholders holding shares valued at less than A$500 (Unmarketable Parcel). As on 12 April 2018, which was record date, the closing price of the company's shares on the ASX was $0.275. On this basis, an Unmarketable Parcel constitutes an individual holding of 1,818 Lucapa shares or less. Further, LOM is offering this Facility to assist holders of Unmarketable Parcels to sell their shares without having to use a broker or incurring brokerage fees. LOM will pay sale transaction costs for shareholders who use this Facility. However, the tax consequences from the sale will remain the responsibility of individual shareholders. In addition, the sale price will be determined once all the unmarketable shares under the Facility are sold by Lucapa. Holders of an Unmarketable Parcel will receive a proportionate share of the sale proceeds from all shares sold under the Facility without any deduction for brokerage or handling costs. On the other hand, the latest laboratory results received from ongoing Lulo kimberlite drilling and sampling program indicated that follow-up work at L164 has been recommended as highest concentrations of kimberlitic indicator minerals of any Lulo kimberlite tested to date were witnessed. While we would wait for some more key catalysts, LOM stock has risen 19.15% in three months as on April 26, 2018. As of now, we give an “Expensive” recommendation on the stock at the current price of $ 0.275.
 

Kimberlite Targets (Source: Company Reports)
 

Visioneering Technologies, Inc.

Stock on a downward trajectory: Health care stock, Visioneering Technologies, Inc. (ASX: VTI) has recently released quarterly cash flow statement for the period ended 31 March 2018. According to the release, the company registered strong topline growth of 392% to US$555,112 in Q1FY18 from US$112,705 in Q1FY17. Active account during the quarter grew by 29% on QoQ basis to 942 in Q1FY18 from Q4FY17. Cash receipt from customers for the quarter recorded US$632,734 while the group had cash and cash equivalent of US$12,193,607 as at 31 March 2018. Furthermore, the group’s Net operating cash outflow was recorded at US$4,375,373 in Q1FY18, compared to the previous quarter ended 31 December 2017. With this result, the management of the company continues to increase the purchase of lenses to satisfy anticipated demand and made investments in sales and marketing activities to support future growth. The Group is poised to expand product portfolio availability internationally in 2018, including some Asian countries, where up to 90% of children are burdened with myopia.


Q1FY18 Cash Flow Statement (Source: Company Reports)

Meanwhile, the stock price has been falling by 22 per cent this year to date and was down by 8.6 per cent in the past three months, as on April 26, 2018. The stock was further down 4.7% on April 27, 2018. Partnering with product distributors for international launch and new product line extensions can impact cost. Based on stiff competition in core business while cost concern on research arises and limited success outside the core business, with currency fluctuation risk and demand of the highly profitable products, we give an “Expensive” recommendation on the stock at the market price of $ 0.405.

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