BOD Australia Limited

BDA Details
 
Record Purchase Order to Strengthen FY2020 Revenue: BOD Australia Limited (ASX: BDA) is a vertically integrated developer, manufacturer, distributor and marketer of plant-based natural health supplements and beauty solutions. As on 8 May 2020, the market capitalization of the company stood at $29.7 million. The company has recently received a binding purchase order of $1.43 million from Health & Happiness Group Ltd. These orders will materially add to the company’s growing revenue profile, which has increased to $3.4 million for the 9 months of FY20, up ~144% on the pcp.


Binding Purchase Order from H&H Group (Source: Company Reports)

First Medicinal Cannabis Prescriptions Received in the UK: BDA has recently received its first prescriptions for MediCabilis™ from patients in the United Kingdom. The UK market is a major opportunity for the company with around 7.3 million consumers using CBD annually. Consumers are expected to grow in value to US$3Bn per annum by 2024 and to €8.8Bn by 2028, representing a four times larger market than Australia in 2028. 

Rapid Growth Trajectory Continues Following Strong Product Uptake: The company has released its quarterly update for the period ended 31 March 2020, wherein it achieved a considerable increase of 144% in revenue to $3.4 million, on YTD basis. During the three months period, BDA generated sales of $1.25 million and received $292k from its customers. This notable increase in revenue and sales was driven by the introduction of new CBD isolate strengths in the MediCabilis® range, continued uptake of medicinal cannabis products, sales growth of the CBII range in the UK and the launch of hemp-based products. The company has also received a refund of $851k under the Australian Government’s Research and Development Tax Incentive Scheme and reported a healthy cash position of ~$7.2 million.

Future Expectations and Growth Opportunities: With the increasing presence of the company in Australia and the United Kingdom, BDA expects a material increase in prescription volumes in the coming months. The company will also introduce its 2.5% and 10% strength CBD isolate products in the UK market, which may underpin additional prescription volumes. BDA has witnessed increased demand over the past quarter and is confident of its isolates becoming widely prescribed. The company is focused on utilizing capital towards near-term revenue generating opportunities, with several initiatives across the business. The company is focused on achieving international expansion and is targeting further growth in domestic prescription volumes for MediCabilis®.

Stock Recommendation: As per ASX, the stock of BDA gave a return of 25% in the past three months and a return of 47.73% in the last one month. The stock is currently trading below the average of its 52-week trading range. The company is rigorously managing its cost base and is witnessing a strong demand for its products. However, the company is exposed to market risks, credit risk and liquidity risk. During 1H20, gross margin of the company witnessed a substantial improvement over the previous half and stood at 61.9%. In the same time span, current ratio of the company went up to 4.88x, up from 2.37x in 2H19. Considering the returns in the past three months, current trading levels, decent financial position amidst the pandemic and positive outlook, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.310, down by 4.615% on 8 May 2020.

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

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