Stocks’ Details
 

Medlab Clinical Limited

Record Quarterly Sales of NanaBis^TM: Medlab Clinical Limited (ASX: MDC) is engaged in nutritional pharmaceutical research and development. The market capitalisation of the company stood at $47.81 million as on 12^th June 2020. The company recently announced that its newest CBD formulation, NanoCBD has been delivered to Australia with the first patient supplied under the Special Access Scheme of Government. During the quarter ended March 2020, the company experienced record quarterly revenue in NanaBis™ sales with a rise of around 26% over the previous best quarter and 217% over pcp. The company achieved these sales despite the negative impact of supply restrictions. In the month of May 2020, NanaBis™ was out of stock due to high demand and COVID-19. The company reported a rise of 42% in invoiced sales for nutraceutical business on QoQ basis.


NanaBis™ Quarterly Sales (Source: Company Reports)

Focus for Future: With respect to nutraceuticals business, the company currently expects improving conditions and anticipates June sales to improve the overall quarter results. The company is focused on the opportunity to deliver a novel pain management alternative to opioids in the form of drug registration.

Stock Recommendation: The company closed the March 2020 quarter with a cash balance of $6.397 million. MDC would continue to pursue growth opportunities in the commercial aspects of the business, pharmaceutical and nutraceutical. The stock of MDC was placed on the trading halt on 11^th June 2020 on the pending announcement in relation to capital raising. The trading halt is expected to lift earlier of commencement of normal trading on 15^th June 2020 or when the announcement is released to the market. The stock of MDC last traded at $0.205 per share.

THC Global Group Limited

THC Secured Export Agreement: THC Global Group Limited (ASX: THC) is a farm to pharma diversified vertically integrated cannabis company. The market capitalisation of the company stood at $55.49 million as on 12^th June 2020. In a recent presentation, the company stated that it is capturing a new pharma OTC market, which is ideal for ideal for high volume pharmaceutical production. THC has also reached an export agreement in Europe, New Zealand, and Canada from Q3 F20, wherein, the initial focus will be on CBD medicine range. In another update, the company has finished the acquisition of leading Australian clinic network” Tetra Health”. Tetra’s network comprises of 600 referring physicians, 30 prescribing physicians, and a national network of dispensing pharmacies. The below picture gives an overview of recent financials:


Key Financials (Source: Company Reports)

Future Plans: The company is aiming to enter in Asia Pacific market in 2021 with identified potential markets in Thailand, Malaysia, China, South Korea and Japan.

Stock Recommendation: The company is well-placed to lead a new $200 million new pharma OTC market. Current ratio of the company stood at 6.85x in FY19 as compared to the industry median of 2.16x. This implies that the company is in a decent position to pay its short-term obligation against the broader industry.THC has EV/Sales multiple of 11.3x, which is in-line with the industry median (Pharmaceuticals) on TTM basis. The stock of THC is trading at a price to book value multiple of 2.5x against the industry average (Pharmaceuticals) of 4.2x on TTM basis. Thus, considering the decent position to lead new pharma market, good liquidity position, plans to enter Asia pacific market, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.375 per share, down by 1.316% on 12^th June 2020.

Cann Group Limited

Execution of Two New Supply Agreement: Cann Group Limited (ASX: CAN) is in the cultivation of cannabis for medicinal and research purposes. CAN is also involved in the manufacturing of medicinal cannabis products. The market capitalisation of the company stood at $145.42 Mn as on 12^th June 2020. Recently, S&P Dow Jones Indices released an announcement stating about quarterly rebalance of the S&P/ASX Indices. Under the announcement, it was mentioned that Cann Group Limited has been removed from All Ordinaries, which will be effective from 22^nd June 2020.

The company has secured two new supply agreements, one with a UK-based specialist importer and distributor of medicinal cannabis products “Astral Health Limited” for the supply of a range of formulated oils, including high THC, high CBD and a balanced formulation. CAN signed another agreement with iuvo Therapeutics GmbH, which is based out of Germany. As per the agreement, CAN would supply medicinal cannabis oil formulations and dried flower material for sale within Germany and other European countries. The below picture provides an overview of cash flow from operating activities:


Cash Flows (Source: Company Reports)

Short-Term Capacity Expansion: Cann Group continues to progress funding options in relation to the planned Mildura facility. Work will also continue on its short-term capacity expansion strategy, which is anticipated to ensure the product is available to meet growing commercial demand in the period prior to the commissioning of the first stage of Mildura.

Stock Recommendation: The company is pursuing a number of options with the objective of placing CAN in a position to proceed on the basis that represents a prudent outcome for shareholders while supporting the continued growth of the business. Current ratio of the company stood at 2.32x in 1H FY20 as compared to the industry median of 1.69x, Debt to equity of the company stood at 0.02x in 1H FY10 against the industry median of 0.18x. The stock of CAN is trading at a price to book value multiple of 2.1x against the industry average (Pharmaceuticals) of 4.2x on TTM basis. The stock of CAN is inclined towards its 52-week low of $0.375, offering decent opportunity for accumulation. Hence, considering the deleveraged balance sheet, execution of two supply agreements and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.990 per share, down by 2.941% on 12^th June 2020.

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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