Australia’s listed medicinal cannabis stocks have recently come under some pressure with most of the stocks slipping on ASX either at the back of volatility or weakness in financial performance and not reporting in line with market expectations. It might be early to say that the stocks are running out of puff and rather be worthwhile to have a balanced exposure in stocks that are expected to witness exponential growth going forward. Following is a snapshot on six pot players -

Zelda Therapeutics Ltd (ASX: ZLD)

ZLD Details

Decline in FY17 revenue: For FY17, Zelda Therapeutics Ltd.’s revenue decreased by $85,408 (34%) on a year-on-year basis. On the other hand, net result changed from a net loss of $224,428 in FY2016 to a net loss of $6,157,415. However, the net assets of the consolidated group increased by $8,120,958 from ($224,427) at 30 June 2016 to $7,896,531 at 30 June 2017, as the loss after tax attributable to members of $6,157,415 was offset by capital raising of $10,000,000. Despite the net loss and increase in cash utilised in operating activities, the group can maintain a healthy working capital ratio as the group’s working capital increased from $(224,427) as at 30 June 2016 to $7,896,531 as at 30 June 2017. On the other hand, the company invited its shareholders to participate as a priority applicant in the capital raising of CannPal Animal Therapeutics Limited (CannPal). In March 2017, ZLD entered into a strategic partnership with CannPal to promote and encourage collaborative activity and exploit opportunities of mutual interest in both the human and animal pharmaceutical markets through the sharing of research data compiled by each of the parties. CannPal is a pet pharmaceutical company and is in the process of listing on the Australian Securities Exchange (ASX). A prospectus to raise $6 million to progress CannPal’s clinical research and development plans for its pharmaceutical and nutraceutical products has been issued. We maintain a “Hold” recommendation on the stock at the current price of $ 0.074

Auscann Group Holdings Ltd (ASX: AC8)

AC8 Details

Well placed to be a leading player in the global medicinal cannabis market: AusCann Group Holdings Limited has reported a consolidated 2017 net loss of $13,759,741 (2016: $5,811,072). The loss included a $7,159,307 non-cash listing fee resulting from an acquisition and $3,677,998 of non-cash share-based payments. During the year, the net assets of the group increased to $15,461,909 at 30 June 2017 from $2,625,006 as at 30 June 2016 as a result of the acquisition and capital raisings. Importantly, AusCann is well positioned for the future through its relationship with Canadian partner Canopy Growth, the largest producer of medicinal cannabis in North America. Further, in combination with DayaCann, its licensed joint-venture in Chile, AusCann is positioned to be a leading player in the global medicinal cannabis market. During the year, the Company formed an exclusive strategic partnership with Tasmanian Alkaloids Pty Ltd. This partnership provides AusCann with the opportunity to fast track domestic manufacture and further strengthens its position within the global industry. We maintain a “Buy” recommendation on the stock at the current market price of $ 0.50
 

FY17 Results (Source: Company Reports)

Stemcell United Ltd (ASX: SCU)

SCU Details

Escrow release of shares: Stemcell United Ltd.’s share price plunged 13% on September 07, 2017 owing to volatility and recent updates and performance. The group recently announced that 248,494,410 shares will be released from holding locks on 14 September 2017. The company, further advised that the top 5 shareholders have agreed to put 87.5% of their shares amounting to an aggregate of 221,447,254 shares on a voluntary holding lock until 14 March 2018. Accordingly, the Company will apply to ASX for quotation of the shares that are released but not in voluntary holding lock. On the results front, for FY17, the group recorded a loss of $2,399,753 against a revenue of $31,619, primarily due to an impairment of $2,139,871 on the Group’s intangible asset. The company intends to extend its suite of TCM cosmetic products which incorporates dendrobium and is evaluating opportunities in the traditional medicine market, with medicinal cannabis as a huge opportunity. Moreover, SCU is focusing to expand its operations into the medicinal cannabis field, which it considers to be compatible with and is a natural expansion of its existing business. Given the ongoing business developments and diversification while the stock has been trading on volatility, we give a “Hold” rating at the current market price of $ 0.040

Creso Pharma Ltd (ASX: CPH)

CPH Details

Gaining momentum with planned launches and geographic expansion: For H1FY17, Creso Pharma Ltd posted a net loss after tax of A$3.53 million including a non?cash cost of A$1.19 million for share?based payment expenses associated with options and performance rights issued during the period. CPH has successfully completed a Placement to institutional and professional investors by raising A$8.8 million, while a Share Purchase Plan raised an additional A$1 million. The funds raised under the Placement and SPP are being used to fast?track the commercialisation of the Company’s cannabinoid?derived animal and human health nutraceuticals and other medical cannabis products and to expand the development pipeline. Creso Pharma’s stock moved up 2.1% on September 07, 2017 with the release of its recent presentation and update, while most of the other pot stocks have slipped on ASX. The group has reported for significant progress with regards to the development and commercialisation plans for the first animal and human health nutraceutical products. In Q42017, the company aims to launch its proprietary formulated hemp?based complementary feed supplement products for companion animals in Switzerland (including anibidiol® launch in Switzerland with Virbac); and this will help the company to generate its first revenues. It is also the first company to successfully import medicinal cannabis products in Australia. Further, the acquisition of Mernova Medicinal has expanded its reach in Canadian market. Specifically, Mernova is said to deliver on Creso’s strategy of establishing a Canadian presence in the pursuit of opportunities in the medicinal and recreational cannabis space given the growing demand. The group is also progressing well with regards to its geographical expansion discussions with commercial partners in Europe, Middle East, Latin America, South Africa, and JAPAC. Given the prospects and growing demand for cannabis, we give a “Hold” at the current price of $ 0.49

Cann Group Ltd (ASX: CAN)

CAN Details

Completed harvest of first cultivation cycle: CAN group, which is the first Australian company to secure the necessary licences to undertake research and to cultivate cannabis in Australia, has been surging high this year at the back of those licenses granted by the government. In fact, the group is reported to have two cannabis research permits. CAN has recently completed harvest of its first cultivation cycle of medicinal cannabis at its Southern facility in Victoria. However, the harvest is said to be relatively small, and only validates CAN’s processes. From financial standpoint, the group has raised about $13.5m in heavily supported Initial Public Offering. CAN has not posted any revenues yet and is said to have reported an operating cash loss for the quarter ending June 30, 2017. Meanwhile, the group has joined Joins Medicinal Cannabis Information Portal. The stock has been trading on volatility now and has slumped about 2.8% on September 07, 2017. It might be better to wait for some positive financials and major milestones being achieved given the run-up in the stock price in the last three months (about 134%). We give an “Expensive” recommendation at the current price of $ 1.18
 
                                                       
Milestones (Source: Company Reports)

MMJ Phytotech Ltd (ASX: MMJ)

MMJ Details

Weakness in FY17 result impacting the stock momentum: This year to date, MMJ Phytotech Ltd.’s stock has been up 62.7% at the back of the cannabis’ boom but has fallen about 7.8% in last five days (as at September 06, 2017) as the group came up with a weak FY17 result. The revenues from ordinary activities fell 70.2% while loss for the year after tax of about $10,509,000 was reported. MMJ also reported for an increase in one off expenditure items owing to the acquisition of 60% of Harvest One Cannabis Inc. through a reverse take-over (“RTO”). On the other hand, net assets of the consolidated entity were up following the completion of the listing on the Toronto Stock Exchange of Harvest One Cannabis and capital raising of CAD$25 million. At the back of the result, the group did not pay or declare any dividends. It is interesting to note that Harvest One Cannabis’ Patent Cooperation Treaty (PCT) application for its cannabidiol (CBD) based capsules has now been published. Given the current state of prospects and the initial run-up, we believe that the stock is “Expensive” at the current price of $ 0.35
 
Result (Source: Company Reports)

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