AusCann Group Holdings Ltd.

AC8 Details

AusCann Group Holdings Ltd. (ASX: AC8) is in the business of cultivating, manufacturing as well as supplying medical cannabis products.

Result Performance (FY21 Ended 30 June 2021)

• Revenue of the company from ordinary activities for the full-year period stood at $1.83 million, an increase of 7% on previous year.
• The company’s loss for the full year period stood at $8.64 million, as compared to $7.08 million in the previous year. This figure included $212,511 of non-cash share-based payments, a $2,593,417 non-cash impairment of inventories, and one-off costs of $1,172,798 relating to the acquisition of CannPal Animal Therapeutics Limited.
• Net cash used in operating activities (Excluding one-off costs), for the period stood at $5.76 million, as compared to $10.55 million in the previous year.
• Net tangible asset backing per ordinary share for the period stood at 10.09 cents, as compared to 10.93 cents in the previous year.

Key Data (Source: Company Reports)

Recent Update:

• On 18 October 2021, the company informed the market that it has submitted a pre-submission conference meeting request with the Food and Drug Administration, Centre for Veterinary Medicine for CPAT-01, a Phase 2 veterinary drug candidate made from standardised THC (tetrahydrocannabinol) and CBD (cannabidiol) extracts, in development for pain, inflammation and decreased quality of life in dogs with Osteoarthritis.

Outlook:

The company successfully completed the acquisition and integration of CannPal Animal Therapeutics Pty Ltd (CannPal), by way of Scheme of Arrangement, with new leadership in place for the combined entity. Moreover, it has received positive clinical results for 46 dog Phase 2A pilot study for FDA veterinary drug candidate, CPAT-01, confirming improvements in pain, lameness and quality of life in dogs with osteoarthritis.

The company has entered into an agreement to lease its Wangara facility as part of a revised growth strategy to reduce operating expenses and maximise the value of the Company’s assets.

Key Risks:

The company is exposed to the risks like credit risk, liquidity as well as cash flow interest rate risk and currency risk.

Technical Overview:

Chart:

Source: REFINITIV

Note: Investors can consider exiting from the stock if the Resistance levels mentioned as per the technical analysis have been achieved and are subject to the factors discussed above.

Stock Recommendation:

The stock of AC8 witnessed a fall of ~48.6% in 9 months as well as ~32.14% in 1 year. It has made a 52-week low and high of $0.084 and $0.300, respectively. The stock of the company is trading towards its 52-week lower levels. Also, the company posted a current ratio of 23.37x in FY 2021 as compared to the industry median of 2.40x.

Considering the aforesaid facts, we give a ‘Speculative Buy’ rating on the stock at the current market price of A$0.093 (Time: 12:04 pm (GMT +10), Sydney, Australia) as on 20^th October 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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