AusCann Group Holdings Limited

Decent Liquidity Position to Fulfil Growth Initiatives: AusCann Holdings Limited (ASX: AC8) has recently announced that AC8 stock, as per March 2019 Quarterly Rebalance of the Ordinaries S&P Dow Jones Indices, was added to All Ordinaries, effective from March 18, 2018. This might augur well for the technical demand for the shares of AC8 since the demand for the shares from ETF’s might increase in the upcoming period. Moreover, it is to be noted that the company has appointed Mr. Ido Kanyon as Chief Executive Officer (CEO), commencing from May 22, 2019. He has more than 15 years of experience as Senior Executive with most recent at Teva Pharmaceutical Industries (‘Teva’), the world's largest generic pharmaceutical company. Further, the company is expected that his experience, energy and drive will successfully lead AusCann into the next phase of growth as a pharmaceutical development, sales and marketing business. Besides this, one of its Directors, Mr. Malcolm James Washer, had an indirect interest in the Company, acquired 144,000 fully paid ordinary shares via on-market trade for a total consideration of ~$58,238 during 7 March 2019 to 8 March 2019.

In its half yearly results, it reported increase in revenue from ordinary activities by 261% pcp to $466,305 in H1FY19. Its loss from ordinary activities after tax attributable to members decreased by 8% pcp to $4,438,372 in H1FY19. The operating cash outflow of the company was $3,190,249 for the half year ended 31-December 2018. Among the key ratios, the current ratios improved by 74.4% Y-o-Y to 73.29x in 1FY19 as compared to 23.17x in 1FY18. It represents that the company has adequate liquidity to fund its business objectives and other growth initiatives.Moreover, the company enjoys debt-free status along with decent cash & cash equivalent reserve of $41,743,655as at 31 December 2018. No dividends were proposed or paid during the period.
 

H1FY19 Cash-Flow Statement (Source: Company Reports)

What to expect from the company:It is expected that the company will release its new proprietary solid hard-shell capsules (manufactured under contract by PCI Pharma) to treat chronic pain for clinical trials during 2019. It aims to continue to diversify and increase cannabis raw material supply base. Its JV with Fundación Daya forming DayaCann will continue to pursue export licenses from Chile. Under the product development, the new AusCann R&D facility is under progress in WA, and it is expected that site will encompass cultivation, extraction and new product development. AusCann expects to invest further capital of up to $6 Mn over time to customize and fit out its ongoing projects.

Stock Recommendation: Meanwhile, the stock has fallen 39.22% in past three months as on March 20, 2019 and is down by 13.89% in the past five days due to the volatility in the cannabis space and speculation around directors’ interest in the company’s shares.we recommend a “Hold” on the stock at the current price of $ 0.315 (up 1.613% on 21 March 2019), as it trades close to 52-week lower level and is yet to stabilize a bit.
 

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