Most of the Australian pot stocks climbed up on June 21, 2018 after the news came out from Canada about approval of a bill from Prime Minister Justin Trudeau’s government to legalize use of small amounts of recreational cannabis by adults. In light of this, Canadian Marijuana shops are set to open sales from October 17, 2018. Based on this development, several ASX listed stocks rallied up on June 21, 2018 such as Zelda Therapeutics (ASX: ZLD), which was up 5.435%. However, one key beneficiary was AusCann Group (ASX: AC8).
 

AusCann Group Holdings Ltd

Decent Outlook:AusCann Group Holdings Ltd.’s (ASX: AC8) stock climbed up 16.2 per cent on June 21, 2018 post the boost in cannabis sector. On the other hand, the group lately responded to ASX price and volume query related to the intra-day trading volatility of June 20, 2018. Following this, the company informed to ASX that they were not aware of any information that could explain the recent trading in the Company's securities. However, it is yet to be understood that why the stock price showed heavy volatility on June 20, 2018 despite positive outlook at the back of benefits from synergies through agreements like the one with Australian Pharmaceutical Industries Ltd, strategic partnership with Canopy, and Chilean Joint venture completing second harvest. Besides this, the group invested around $1.5 Mn in Q3 FY18 on research and development, operating costs, joint venture expenses, consulting and legal fees and other associated expenses. We expect that this strategic investment will support premiumization of its product mix portfolio which will aid revenue in future. On the financial front, the current ratio improved from 0.96x in December 2016 to 42.03x in December 2017. In addition to this, the group reported cash reserves of $11.89 Mn as on March 31, 2018 and is well funded to maintain its operational momentum in Q4FY18 and thereafter.

Meanwhile, the stock has risen 68.75% in past six months as at June 20, 2018 but fell about 16.9% in last five days based on a major sell-off while concerns over competitive analysis with peer Cann Group were fuming up. It is notable that the stock has significantly risen around 18990.04% in the last five years. Based on the developments and price rally so far, we maintain our “Hold” recommendation on the stock at the current market price of $ 1.225.
 

Key Milestones Projected For 2018 (Source: Company Reports)

 
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