Stocks’ Details

Cann Group Limited

Significant Progress on New Production Facility:Cann Group Limited (ASX: CAN) is engaged in the cultivation of medicinal cannabis for medicinal and research purposes.

Half Yearly Performance: The company recently released the financial results for the six months ended 31^st December 2020, wherein revenue from sales amounted to $0.57 million. During the period, the business incurred an operating loss amounting to $8.4 million. The company reported on the progress of the new production facility near Mildura. As per the release, the company notified about the new staged construction plan for production of 12,500 kgs of cannabis dry flower, denoted by stage 1A, by the end of CY20. Funding decision pertaining to the same is expected to be announced latest by March. The company also talked about the manufacture of locally sourced medicinal cannabis formulations which are anticipated to be launched in Q1CY20.


Income Statement (Source: Company Reports)

Stock Recommendation: The stock of the company generated YTD returns of 39.20% and is currently trading below the average of its 52-week trading range of $0.375 - $2.570. Towards the end of March, the company is targeting for the commercial release of GMP medicinal cannabis oil products and has already begun GMP extraction activities for the first batches of medicinal cannabis resin manufactured by IDT Australia Limited. The business is progressing well on the back of multiple achievements, including the execution of a distribution agreement, clearances for medicinal cannabis facilities in Melbourne, new additions to Board capabilities, etc. The stock has a Price to Book multiple of 1.8x, lower than the industry median of 2.4x. Considering the backdrop of the above factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.925, up 6.322% on 05^th March 2020.

AusCann Group Holdings Limited

AC8 Undertakes Board Renewal:AusCann Group Holdings Limited (ASX: AC8) is engaged in the development of a cannabinoid pharmaceutical product and conducting clinical trials for the same.

First Half Highlights: During the first half ended 31^st December 2019, the company finalised the development, manufacturing and testing of its hard-shell capsules, to ensure quality, reliability and consistent performance throughout the life of the product. As a result, the company can now be recognised as a commercial producer of reliable pharmaceutical products. During the half, the company progressed on its product development facility in Perth, with construction completed at an expenditure of $4.5 million to date. Additional expenditure has been scheduled for R&D equipment with respect to the facility. Consolidated loss for the period amounted to $3.4 million as compared to a loss of $4.4 million in the prior corresponding period.


P&L Account (Source: Company Reports)
 
Stock Recommendation: The stock of the company generated positive returns of 17.95% over a period of 3 months and is currently trading below the average of its 52-week trading range of $0.170 - $0.530. Apart from the progress stated in the above section, the company has also entered into an agreement with Clifford Hallam Healthcare for distribution of its products in Australia. This represents another step forward towards clinical evaluation and prescription of cannabinoid-based products to patients. The company has renewed its Board to incorporate new capabilities while the business heads towards growth. The stock has a Price to Book multiple of 1.8x, lower than the industry median of 2.4x. Considering the aforesaid factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.240, up 4.348% on 05^th March 2020.

Creso Pharma Limited

Strong Positioning in Key Markets:Creso Pharma Limited (ASX: CPH) is engaged in the development and commercialisation of pharmaceutical-grade cannabis and hemp-based nutraceutical products.

Performance Highlights: During the year ended 31^st December 2019, the company reported revenue amounting to $3.626 million, representing a whopping increase of 549% on FY18 revenues. This increase came in majorly as a result of sale of animal health nutraceutical product. The company possesses strong R&D capabilities and is continuously working on building a pipeline of new products, in addition to the current portfolio of 13 products. The company is also focused on global expansion for growth and aims to extend its offerings to new markets. In April 2019, the company received approval to sell its first medicinal cannabis product into Brazil and delivered its first orders of medicinal CBD oil to New Zealand in the month of October. Recently, the company also notified about an agreement with Farmagon Norway to market its products in Scandinavia.


Results Snapshot (Source: Company Reports)

Stock Recommendation: The stock of the company generated negative YTD returns of 28.70% and is currently trading close to its 52-week low level of $0.072. The company enjoys the benefit of having an established business in Europe, which is expected to demonstrate rapid growth over the next five years. Moreover, the company will also reap benefits out of its operations in Latin America and Africa, which are believed to be favourable lands for cannabis production. The operations of the company are well aligned with the recent industry trends and are expected to drive growth, with increased popularity of cannabis across the globe. The stock has an EV/Sales multiple of 4.9x, lower than the industry median of 9.3x. Considering the performance in FY19, industry outlook, growth initiatives, and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.085, up 3.659% on 05^th March 2020.

Medlab Clinical Limited

Sale of Goods Up by 34%:Medlab Clinical Limited (ASX: MDC) sells nutraceutical products and is engaged in pharmaceutical research and commercialisation. Pursuant to the request of the management, the stock of the company has been put on a trading halt, pending the release of an announcement. Normal trading is expected to commence on release of the announcement or on 9^th March 2020, whichever is earlier.

Performance Highlights: During the half year ended 31^st December 2019, the company reported loss after income tax and non-controlling interest amounting to ~$7.10 million, as compared to a loss of ~$3.66 million in the prior corresponding year. During the half, the company reported significant progress in its research and commercial operations. The period was marked by commercialisation of cannabis-based medicines, with sale of goods rising by 34% after discount and cash collections rising by 49%.


Results Summary (Source: Company Reports)
 

Stock Recommendation: The stock of the company generated negative YTD returns of 24.59%. During the first half, the company reported decent growth in sales and cash collections, with continued acceleration on the research front. The Company is expanding its nutraceutical business into new geographies like the US, UK and Asia, which is expected to generate additional revenue with minimal operating or capital expenditure. In Australia, the company will now focus on delivering better quality products to drive growth in margins. The stock has an EV/Sales multiple of 7.1x, lower than the industry median of 9.3x. Considering the above factors, we give a “Speculative Buy” recommendation on the stock that last traded at a closing price of $0.230 on 04^th March 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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