Zelira Therapeutics Limited

ZLD Details

Business Update:  Zelira Therapeutics Limited (ASX: ZLD) is a biopharmaceutical company that develops Zenivol, a cannabinoid-based medicine for treating chronic insomnia and involved in a human clinical trial program focused on insomnia, autism, and opioid reduction etc. The market capitalisation of the company as of 13 July 2021 stood at ~$59.51 million. As per a recent announcement, the company received an Institutional Review Board (IRB) approval for Observational Clinical Study against a major big pharmaceutical company's multibillion-dollar revenue drug, using Zelira's proprietary, patent-protected product in the US and expected the result in H1FY22.

Uptake of CBD into the Brain: The research team funded by the company from Curtin University (Australia) have developed a potential technology that improves delivery of cannabidiol (CBD) based drugs into the brains of mice by up to 40-times. This is used to treat neurological disorders such as Alzheimer’s disease, multiple sclerosis, and traumatic brain injury.

Product Launch in Washington DC: The company has updated about the product launch of Zelira’s HOPE products in the District of Columbia (Washington DC) through its partnership with Alternative Solutions LLC.

Distribution Agreement with Health House in the UK: The company has expanded its footprint in the UK market with the launch of CBD toothpaste through a distribution agreement with Health House International (ASX: HHI). HHI is required to cumulatively purchase US$500,000 of Zelira’s CBD Toothpaste in the first 12 months.

Q3FY21 Financial Performance:

• During the quarter, the company has recorded a hike in cash receipt by 249% to $225k in Q3FY21, compared to H1FY21 driven by the launch of CBD products in the US market.
• The company's net cash flow used in operations was $2.3 million in Q3FY21, which comprises product manufacturing and operating costs at $0.4 million, R&D cost at $0.3 million, staff cost $0.8 million, and administrative and corporate costs at $0.8 million.

Financial Performance (Source: Analysis by Kalkine Group)

Outlook: The company is focused on multiple products offering in Australian, US markets to generate its revenue. Additionally, ZLD is progressing towards additional licensing for HOPE and Zenivo in the USA and looking forward to expanding its distribution into the global market, including Germany, the UK. Further, the company is focused on its clinical trials and activities to develop and evaluate the efficacy, safety and tolerability of its proprietary formulations and products.

Key Risks: The company is exposed to licensing and regulatory risks, impacting the delay in a product launch in the market.

Stock Recommendation: As per a recent announcement, the company has signed licensing and management agreement with Levin Health for a chronic pain treatment clinical trial on retired athletes. The collaboration will give exposure and growth to the company's proprietary insomnia and HOPE products globally. The stock of ZLD is trading below its average 52-weeks' levels of $0.043-$0.140. The stock of ZLD gave a positive return of ~4.166% in the past one week and a negative return of ~9.09% in the past one year. On a TTM basis, the stock of ZLD is trading at a Price/Book multiple of 1.4x, lower than the industry median (Biotechnology & Medical Research) of 5.6x. Considering the current trading levels and valuation on a TTM basis, strategic collaboration for product launch, expanding its footprint in global market, strategic partnership, receipt of approval for clinical study and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.050, as on 13 July 2021.

ZLD Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line represents RSI (14-period).

Keytone Dairy Corporation Limited

KTD Details

FY21 Financial Performance:  Keytone Dairy Corporation Limited (ASX: KTD) is a manufacturer and exporter of dairy and nutritional products in New Zealand and Australia. The market capitalisation of the company as of 13 July 2021 stood at ~$42.32 million.

• During the year, the company has recorded a sales growth of ~125% to $50.7 million in FY21, compared to $22.5 million in FY20. The sales growth supported by the New Zealand Dairy sales more than double to $11.3 million in FY21 against $5.0 million in FY20.
• The year ended with a cash balance of $4.0 million as of 31 March 2021.
• During the year, the company has reported inventory to be more the doubled to $11.1 million in FY21.

Revenue Trend (Source: Analysis by Kalkine Group)

Increase in Walmart Sales: The company has reported tripled sales from Walmart China in the five months to May 2021 to NZD3.3 million, compared to the pcp. 

Launch of Tonik Energy: The company has recently launched a new product range of Tonik Energy in Australia and New Zealand with the first production of ~$100,000 in sales.

Key Risks: Due to the COVID-19 pandemic, the company is faced significant operating and logistics challenges like delayed sales, rising inventory prices, increased lead times and an increased working capital cycle that impacted the operating profit.

Outlook: The company has enabled accelerating growth in its services, despite the impact of COVID-19 impact due to its flexible and diversified operational base. Additionally, KTD has been undergoing trials for its product in the international market, including Malaysia and the Middle East, in FY21. Further, the company estimates an increase in the international contract that could stimulate production and delivery in FY22.

Stock Recommendation: As per a recent announcement, the company’s subsidiary, Omniblend, has been awarded Manufacturing Modernisation Fund grant of $800k from the Australian Federal Government. The stock of KTD is trading below its average 52-weeks' levels of $0.110-$0.300. The stock of KTD gave a positive return of ~24% in the past one week and a negative return of ~37.99% in the past one year. On a TTM basis, the stock of KTD is trading at an EV/Sales multiple of 1.0x, lower than the industry average (Food & Tobacco) of 8.4x. Considering the current trading levels and valuation on a TTM basis, increase in demand in the international market, expanding its footprint, strategic partnership, grants from the Australian Federal Government and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.150, down by 3.226%, as on 13 July 2021.

KTD Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line represents RSI (14-period).

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 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 the 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

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