Is The Hydroponics Company a good pot stock to have – THC?

The Hydroponics Company Limited (ASX: THC)

THC Details

Growing the diverse Cannabis business with acquisition of Australian Biomanufacturing Facility: The Hydroponics Company has two business units: the development of medicinal cannabis, and the manufacture of hydroponics equipment, materials and nutrients. Recently, the Company acquired the production facilities of an international pharmaceutical company, LEO Pharma. The Company has separately acquired the freehold land and buildings housing facilities. The facilities acquired by THC are one of the largest pharmaceutical botanicals extraction and refinement plants in the Southern Hemisphere. The acquisition will enable THC to become a globally significant manufacturer of medicinal cannabis products for the Australian domestic and future export markets. The facility provides THC with a fully functioning biomanufacturing plant with extraction technology to fractionate and crystalize during the manufacturing process, and a high-quality purification system that will enable Australia to produce a broad range of high quality, pure cannabinoids as Active Pharmaceutical Ingredients (API) and the total consideration paid for the land and facility was $2,550,000.


Biomanufacturing Operational Assets Acquired by THC (Source: Company Reports)

THC has secured the engagement of key personnel with expertise in operating the Queensland biomanufacturing operation. There are no changes to the board or senior management proposed because of the acquisition. In January 2018, Federal Government Health Minister the Hon. Greg Hunt stated that the Turnbull Government would permit the export of Australian manufactured medicinal cannabis products which will improve the viability of domestic producers while securing supply for Australian patients. This will help both the domestic supply and Australian producers by strengthening the opportunities for domestic manufacturers, but the exports will be subject to the legislation which will be passed by the Federal Parliament. With this backdrop, the recent move will be a game-changing investment and will be provided with the large-scale, state-of-the-art biomanufacturing capabilities that are required to lead Australia’s medicinal cannabis industry.

The Group announced that 2,50,000 ordinary shares will be released from ASX escrow on 8 May 2018 according to the appropriate Listing Rule. After this update on acquisition, securities of THC were lifted immediately from the trading halt and were up by 11.5 per cent with reinstatement to official quotation and this acquisition will play an important role in its roll-out strategy that will generate substantial growth for the Company. Given the rally and further growth potential while the stock had fallen about 33% in last three months, we put a “Hold” recommendation at the current market price of $ 0.680.
 

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