Althea Group Holdings Limited (ASX: AGH)

Based out of Australia, AGH operates as a distributor of medicinal cannabis products in Australia and the UK. It owns an extraction and manufacturing facility in Canada.  AGH conducts its operations in three segments- Australia, the United Kingdom, and Canada. It was listed in ASX on September 21, 2018. AGH holds a market capitalization of AUD 67.67 million as of 3^rd February 2022.

Operational and Financial Updates: As per the quarterly results for the period ending December 31, 2021, AGH made a record rise in customer receipts with a 107% increase from the previous period and a 21% rise on a QoQ basis. Expenses dropped by $354k during the quarter.  Its subsidiary, Peak Processing Solutions becomes EBITDA positive and is forecasted to post receipts of over $15 million in FY22. Its global cannabis-based medicine business, Althea achieved a record $1.2 million in customer receipts for December 2021 month. It had reported operating cash outflows of $2.18 million in Q2FY22. And closed the period with a cash balance of $10.25 million in contrast to $12.73 million posted in the preceding quarter.

In FY21, revenue surged $11.54 million against $5.06 million in the prior year. Due to heightened employee-related expenses, AGH reported a net loss of $15.05 million against $14.77 million posted in FY20.

Technical Analysis: AGH's prices are trading with the lower lows and lower highs formation and hovering around the support turned resistance level AUD 0.230 for the past couple of weeks, indicating a negative bias. On the weekly chart, the trend-following indicators 50-period SMA and 20-period SMA are above the CMP and the leading indicator RSI (14-period) is trading around an oversold zone, further supporting a downward trend. Now the next important support level for the stock is at AUD 0.1950, while resistance is at AUD 0.2350 level.

Considering the historical losses, operating cash outflows in Q2FY22, a decline in the cash balance, and current trading levels, investing in this stock at such price levels becomes risky and should be taken with a prudent strategy, hence a ‘Watch’ stance is suggested. The stock was analysed as per the closing market price of AUD 0.215 per share as of 3^rd February 2022.

Weekly Technical Chart – AGH

Source: REFINITIV

Note:  The purple color line in the chart depicts RSI (14-period), while the yellow color line represents the trend line. The sky-blue and red-color lines show 21-Period SMA and 50-Period SMA, respectively. The green-color histogram at the bottom of the charts represents volumes.

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 for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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 the uptrend may take a pause due to profit booking or selling interest. 

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 Yellow colour line reflects the Trendline, which shows whether the direction of the scrip is upwards or downwards.

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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