Creso Pharma Limited

Creso Pharma Limited (ASX: CPH) provided a Q2FY18 update in which the group indicated to continuously invest heavily in Canadian cannabis growing facility to fast-track completion of building in Q3 2018 with first revenues planned for Q1 FY19. Moreover, the company has expanded its footprint into North and South America with the support of the construction of Mernova Medicinal’s cannabis growing facility, the completion of Creso’s acquisition of Kunna S.A.S. in Columbia, and appointment a Chief Operations Officer (COO) for the Americas region. There have been several important product developments during the second quarter of 2018 such as product launches of anibidiol and cannaQIX in Switzerland that have gained positive traction from the market including reorders of the products.

On the financial front, Cash balance at 30 June 2018 was $ 11.35 million (vs. 31 March 2018: $11.03 million) with net operating cash outflow during the quarter ended 30 June 2018 of $1.65 million. Cash receipts for the period included receipts from customers totalling $7k for the quarter ending 30 June 2018. Recently, the group has highlighted about raising $2.7 Mn from the Options Entitlement Issue for its operations, primarily as its working capital. Then $2.5 million in cash will be funded from loans to the Company. The raisings will support the cash reserves, following the significant investments in the Company’s operations, especially the commitment of a total of more than $10 million to the construction of the Company’s cannabis cultivation facility in Nova Scotia.

In the above regard, CPH has dispatched Prospectus lodged with ASX on 25 July 2018 to its Shareholders lately and this includes an Entitlement and Acceptance Form outlining Eligible Shareholders Entitlement under the offer while the offer closes on 14 August 2018. The non-renounceable rights issue of up to 56,537,772 unquoted options to acquire fully paid ordinary shares in the capital of the Company with one New Option for every two shares held by eligible shareholders at the record date, has been made at an issue price of $0.05 per New Option. The record date was highlighted to be 31 July 2018. While the entitlement offer looked attractive in view of the issue price, however, there are risks linked given Creso being a speculative stock and options might make relevance with a significant share price surge (while year to date fall in the stock has been 33%).
 

Creso’s Product pipeline (Source: Company Reports)

Meanwhile, the share price has fallen 26.47 per cent in the past six months and down by 3.10 per cent in the past one months as at August 03, 2018. As of now, the stock is trading over its 52-week low level ($ 0.455), hence we maintain our “Hold” on the stock at the current price of $ 0.625 and will keep a watch on the positive developments ahead.

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