Stocks’ Details

Creso Pharma Limited

New Purchase Orders Giving Boost to the Revenues: Creso Pharma Limited (ASX: CPH) is engaged in developing cannabis and hemp-derived therapeutic-grade Nutraceuticals and Medical Cannabis products with a range of applications in both human and animal health. CPH has an existing portfolio of CBD products being actively sold in several countries globally, with its flagship CannaQIX® 50 product already available in Australia via prescription, under the LozaCan brand. As reported on 3 Feb 2021, CPH’s wholly owned Canadian subsidiary, Mernova, has secured 4 new purchase orders with a total value of A$248,682, unlocking a new market in New Brunswick. This purchase order will give a boost to the revenues for CPH going forward.

Robust December 2020 Quarterly Results: CPH has posted decent quarterly revenue growth with consolidated group revenues reaching to $1.986m over the period. Growth in revenues was largely attributable to nutraceutical and animal health product sales during the quarter, worth $1.6m. CPH welcomes Low-dose CBD products which can be sold over the counter in Australian pharmacies from 1 Feb 2021. CPH has posted positive net cash flows of A$6.0mn on the back of proceeds from the sale of equities.

Consolidated Statement of Cash Flow (Source: Company Reports) 

Outlook: The company has plans to launch the cannaQIX® range in South Africa in April 2021. The next step for the partnership with pharmaceutical company Pharma Dynamics, a leading South African Pharma company, is to push the commercialization of CPH’s products into additional African countries.

Stock Recommendation: In the last 1 months, CPH has increased by 22.86% on ASX. The stock is currently trading below the average 52-week high low range of $0.024-$0.470. On the technical analysis front, the stock has a support level of ~$0.205 and resistance of ~$0.283 level. Considering the company’ robust revenue growth of 700% YoY during December quarter, recently secured new purchase orders from Canada, modest outlook, and current trading level, we recommend a “Speculative Buy” to the stock at the current market price of $0.210 as on 3 Feb 2021.

Cann Group Limited

December 2020 Quarterly Activities: Cann Group Limited (ASX: CAN) is engaged in the development of cannabis for medicinal and research purposes. CAN secured $50m bank debt facility from NAB for construction of its state-of-the-art medicinal cannabis production site near Mildura. CAN has secured an order of 19,000 units from leading European importer and distributor of medicinal cannabis iuvo Therapeutics. Cann group ltd is reviewing alternatives for recommencement of construction at Mildura facility. CAN’s quarterly cash flow report shows a $645,000 reduction in operating costs from the previous quarter due to lower production charges. Product manufacturing costs and inventory build were down at $2.69m from $3.6m in the previous quarter and broadly in line with the $865,000 per month target outlined at the AGM. Staff & Administration and corporate overheads, at $2.99m, were in line with the last quarter ($2.91m).

Capital Expenditure Plans: CAN has made an expenditure of $712,000 in property, plant and equipment, namely capital expenditure for the Mildura facility. CAN has announced a strategic CAD 1 million investment in iuvo as part of iuvo’s CAD 5 million capital raising. The capital raised by iuvo will be used to expand iuvo’s sales and marketing capabilities and construct a manufacturing facility in Malta. The investment in iuvo gives CAN exclusive external supply rights to iuvo for medicinal cannabis extracts until 31 December 2021, with those rights then converting to preferred non-exclusive status.

Revenue Growth (Source: Refinitiv, Thomson Reuters) 

Outlook: As per the CAN guidelines last year, projected sales revenues are heavily skewed to the 2H of FY21, due to the requirement for certain regulatory clearances to be finalized. The company is working along with the authorities in Australia to accelerate those clearances. The company expects that revenue will be boosted from announced sales contracts and purchase orders that are anticipated to ship to customers in the quarter ending 31 March 2021.

Stock Recommendation: In the last 1 months, the stock of CAN has increased by 8.3% on ASX and 91.17% in last 3 months. The stock is currently trading below the average 52-week price level range of $0.290-$1.370. On the technical analysis front, the stock has a support level of ~$0.604 and resistance of ~$0.773 level. On TTM basis, the stock is trading at P/BV multiple of 2.8x, lower than the industry average of 5.1x. Considering the reduction in operating costs, future capital expenditure plans, decent outlook and current trading levels, we recommend a “Speculative Buy” to the stock at the current market price of $0.65, up by 3.174% as on 3 Feb 2021.

Little Green Pharma Limited

Robust Growth in Revenues Due to Higher Consumption: Little Green Pharma Limited (ASX: LGP) is a vertically integrated medicinal cannabis business with operations from farming and production through to manufacturing and distribution. For the December 2020 quarter, the company posted significant growth in its revenue to $2.45 million (unaudited), up 90% on the previous quarter. LGP has posted a sale of 12,500+ units in Australia, up 50% in quarter ending Dec 2020. The revenues were increased on the back of 20% patient growth compared to the previous quarter, with over 2,700 new patients being prescribed LGP medicines, bringing the total lifetime patients to ~9,500. LGP has posted a positive net cash flows of A$4.49mn and positive cash flows from operating activities of A$853,000.

Consolidated Statement of Cash Flow (Source: Company Reports) 

Outlook: LGP has entered into a strategic partnership with Health Insurance Fund of Australia (HIF). LGP has recently won French government order, LGP will be supplying medicinal Cannabis oils for a French national trial.

Stock Recommendation: In the last 1 months, the stock of LGP has increased by 39.82% on ASX and 116% in last 3 months. The stock has a support level of $0.63. The stock is currently trading above the average 52-week price level range of $0.170-$0.960. On the technical analysis front, the stock has a support level of ~$0.604 and resistance of ~$0.773 level. On a TTM basis, the stock is trading at P/BV multiple of 5.3x, higher than the industry average of 5.1x. Considering the stock’s significant rise in the last few months, current trading level, and TTM valuation, we recommend a “Expensive” to the stock at the current market price of $0.915, up by 15.822% as on 3 Feb 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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