Cann Group Limited

CAN Details

Update on GMP Extraction Activities:Cann Group Limited (ASX: CAN) is in the business of the cultivation of cannabis for medicinal and research purposes. The company is also involved in the manufacturing of medicinal cannabis products. The market capitalisation of the company stood at A$141.71 Mn as on 7^th January 2020. The company, together with IDT Australia Limited, through a release, announced that GMP extraction activities are underway for the first batches of medicinal cannabis resin. It was mentioned in the release that the extracted resin would be utilised as an Active Pharmaceutical Ingredient in the formulation as well as packaging activities at IDT in order to produce GMP medicinal cannabis oil products. This would also be made available for purchase as an Active Pharmaceutical Ingredient (API).

The cannabis oil products would undergo stability testing for supporting a targeted commercial release in late March 2020, once the extracted resin is formulated and packed. The company also added that extracted resin would be formulated into a full range of GMP medicinal cannabis finished dosage form products, which include formulations featuring high THC, high CBD as well as balanced formulations. The key personnel of CAN stated that the commercial-scale extraction of medicinal cannabis resin from CAN’s locally cultivated material reflects an important milestone in the commercialisation phase of the business as well as bolsters the value of the manufacturing arrangement in place with IDT.

In another update, the company announced that it has appointed Ms Geraldine Farrell on the role of Company Secretary and Ms Reena Dahiya as Acting Chief Financial Officer, which came into effect on 6^th December 2019.The following picture provides an idea of financial performance for FY 2019:


Financial Results (Source: Company Reports)

Major Focus of CAN:The company would continue to liaise closely with its strategic partner named Aurora Cannabis Inc with respect to the future offtake requirements. Also, it continues to develop its further market opportunities overseas as well as in Australia.
 
Stock Recommendation:As per the key personnel of the company, during FY19, CAN has continued to execute on its strategy. It has continued to make an investment in important research, which would support advancements in its genetics program. The company has also completed 51 successful harvests at its Northern and Southern facilities. The company also added that, by 2024, the global medicinal cannabis industry would have a market value of over US$60 billion. The company has fundamental commitment to utilise its developing internal capabilities – as well as to leverage the valuable partnerships – in order to produce and supply innovative, high-quality medicinal cannabis products, which are capable of assisting in the treatment of illnesses and conditions. On TTM basis, its P/B multiple stood at 1.8x and the industry average (Healthcare) is 3.6x.

Current ratio of the company stood at 10.74x in comparison to the industry median of 1.90x. This reflects that the company is in a sound position to address its short-term obligation as compared to the broader industry. The stock has provided a return of 116.30% in the span of one month and 59.20% on YTD basis. Therefore, considering the decent liquidity position, improvement in key margins and decent outlook, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.955 per share, down 4.02% on 7th January 2020


CAN Daily Technical Chart (Source: Thomson Reuters)

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