Cann Group Limited

CAN Details

Execution of Share Sale Agreement: Cann Group Limited (ASX: CAN) is engaged in the cultivation of cannabis for medicinal and research purposes. The market capitalisation of the company as on 16 February 2021 stood at ~$209.54 million. As per a recent update, the company has executed a share sale agreement to acquire the Satipharm business from Harvest One Cannabis Inc, for a maximum consideration of CAD$4 million. The proposed acquisition will provide CAN a position in the high growth low dose CBD market segment, and is expected to accelerate revenues, expand market access and strengthen the product pipeline of the company. Satipharm is expected to generate ~$1 million in revenues for the six months to 30 June 2021.

Consideration to Acquire Satipharm (Source: Company Reports)

Outlook: The company has forecasted sales to be in the range of $8-$10 million in FY21, with some FY21 revenue now expected to be recognised in the first half of FY22 due to the impact of regulatory delays in revenue, both in Australian & International markets.

Stock Recommendation: As per a recent update, the company has secured exclusive supply rights with a strategic investment in iuvo Therapeutics Limited, which is a German importer and distributor of medicinal cannabis products throughout Europe. It has received an initial order to ship 19,000 units of 30ml extract for Europe. CAN gave a positive return of ~146.03% in the past three months and a positive return of ~12.31% in the past one month. The stock of CAN is trading close to its average 52 weeks’ trading range of $0.290 -$1.255. On a technical front, the stock of CAN has a support level of $0.482 and a resistance level of $0.913. On a TTM basis, the stock of CAN is trading at a P/BV multiple of 3.4x, lower than the industry median (Healthcare) of 5.2x. Considering the current trading levels, execution of share sale agreement to acquire the Satipharm business & the expected synergy from the acquisition along with the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.775 as on February 16, 2021.

CAN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Althea Group Holdings Limited

AGH Details

Business Update: Althea Group Holdings Limited (ASX: AGH) is engaged in the manufacturing, sales and distribution of medicinal cannabis. The market capitalisation of the company as on 16 February 2021, stood at ~$144.30 million. As per a recent update, the company has completed the export of its first commercial shipment of products to UK-based medicinal cannabis distributor Grow Pharma. 

Q2FY21 Quarterly Update: The company reported record revenue for the quarter, with an increase of 29% in sales to $2.72 million compared to the September quarter. There was a significant increase in the UK revenue by 168% to $0.4 million. Cash receipt during the quarter was at $2.62 million. AGH delivered a robust performance in December 2020 with sales exceeding $1.19 million. AGH has strengthened its balance sheet further during the quarter with the completion of a $6 million placement to institutional and other professional investors. The cash position stood at $8.96 million as on 31 December 2020.

Q2FY21 Operating Cash Flow (Source: Company Reports)

Outlook: The company plans to scale up operations in the UK in FY21 and has set a patient target of 10,000 by the end of 2021.

Stock Recommendation: The company has entered into a supply and distribution agreement of its products with Lyphe Group Limited, in the United Kingdom and Jersey. AGH gave a positive return of ~13.82% in the past three months and a positive return of ~17.58% in the past one month. The stock of AGH is trading above its average 52 weeks’ trading range of $0.150 -$0.670. On a technical front, the stock of AGH has a support level of $0.405 and a resistance level of $0.616. On a TTM basis, the stock of AGH is trading at a P/BV multiple of 3x, lower than the industry average (Pharmaceuticals) of 14.2x. Considering the current trading levels, decent financial performance, export of shipment of products and key strategic agreements with partners, we recommend a ‘Hold’ rating on the stock at the current market price of $0.535, down by 2.728% as on February 16, 2021.

AGH Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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