Cann Group Limited

CAN Details

Joint Investor Webinar: Cann Group Limited (ASX: CAN) is a producer and marketer of medicinal cannabis in Australia and overseas markets. It has an established research and cultivation facility in Melbourne and setting up another facility in Victoria. As of 31 March 2021, the market capitalisation of the company stood at ~$145.86 million. CAN and Emyria Limited (ASX: EMD) recently announced to hold an investor briefing on 1 April 2021 and invited its shareholders to attend the same. Through this webinar, the management seeks to discuss the recent partnership between CAN and EMD to accelerate the registration of an OTC (over the counter), and cannabidiol (CBD)-only capsule with the Therapeutic Goods Administration (TGA) in Australia.

CAN and EMD Partnership: CAN recently announced a partnership agreement with Emyria Limited to accelerate the registration of a low-dose, CBD-only capsule as an OTC medicine with TGA. The companies will jointly monitor the commercialisation agreements’ development and allocation of registration costs. EMD’s R&D team will lead the registration of the capsule program.

Civil Proceeding in HK High Court: CAN have informed the market regarding the recent proceeding in the Hong Kong High Court (HC) against an III-party, Er Ya Trade Limited, registering for a recovery of ~$3.47 million on account of a cybersecurity incident. The Court has issued a ruling in favour of CAN by freezing certain assets of the III-party and compelling it to disclose assets-related information. CAN expects the Court process to take around four to six months and does not guarantee any recovery of the III-party funds. The company will keep the investors informed on further update.

CAN Acquires Satipharm Business: In March 2021, CAN notify the completion of the acquisition of the Satipharm Group of Companies (SGC) for a maximum consideration of CAD$4 million. CAN paid an initial sum of CAD $2.5 million by the issue of 4.27 million CAN shares (new) at $0.602 per share. It anticipates paying CAD$1.5 million on a deferral basis (shares or cash) by September 2021.

Sneak-View of the 1HFY21 Results: The company reported an increase in revenue from ordinary activities to $1.08 million in 1HFY21 versus $569k in 1HFY20. It incurred a net loss after tax of $9.39 million, up by 12.2% YoY for 1H21. During 1HFY21, CAN signed a strategic partnership with iuvo Therapeutics and ordered 19k oil bottles due for shipment. It shipped 1,400 bottles to the UK- based Lyphe Group and 1,400 bottles to Entoura Pty Limited for Australia’s supply. The company has started work at its Mildura site again in February 2021 with Stage 1A and two proposed stages planned based on demand growth. CAN hold $27.65 million of cash and cash equivalents balance at the end of 1HFY21.  

P&L Highlights, 1HFY21 (Source: Company Reports)

Key Risks: The Group is exposed to the risk of fluctuations in the sale prices, feed costs, and estimated cannabis production. Further, CAN faces the risk of achieving timely shipments to customers, required approvals from the authorities, the threat of the pandemic and government-stipulated travel restrictions persisting. 

Outlook: The company has provided revised revenue guidance of $8-10 million for FY21 (previously $15 million), primarily owing to the timing issues and the necessary approvals pending. CAN is prioritising the completion of the commissioning of Stage 1A at the Mildura facility by CY2021 end.

Stock Recommendation: The stock of CAN gave a negative return of 10.74% in the past three months and a positive return of 28.57% in the past six months. The stock is currently trading lower than the 52-weeks’ price level band of $0.29-$1.255. The stock of CAN has a support level of ~$0.378 and a resistance level of ~$0.785. Considering the current trading levels, recent partnership agreement with EMD, gains expected from the acquisition of SGC business, and low debt levels in 1HFY21, decent cash position, and associated risks from the HK proceedings, along with probable shipment delays due to COVID-19, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.540, up by 2.857% on 31 March 2021.

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

Neurotech International Limited

NTI Details

Commencement of First Human Clinical Trial for ASD: Neurotech International Limited (ASX: NTI) is a developer of wearable neurotechnology devices to aid in neurological disorders such as autism, epilepsy. NTI facilitates the screening and treatment of these neurological disorders via its device Mente and its associated platform. As on 31 March 2021, the market capitalisation of the company stood at ~$48.57 million. On 31 March 2021, NTI updated on the near-completion preparations for the Phase I/II open label trial to assess the efficacy and safety of the orally provided DCGL/NTI all-inclusive medical cannabis plant extract to “ASD” (Autism Spectrum Disorder) children (aged 5-17).

Cultivation Collaboration with CannaPacific: On 9 March 2021, NTI announced its cultivation partnership with CannaPacific Limited (CPL) to produce and maintain medical cannabis genetic stock. CPL will also co-develop elite varietal strains along-with NTI and DCGL under their exclusive licencing contract. With the above collaboration, NTI seeks to plan further clinical trials/studies for Q2-Q3FY21 to evaluate the efficacy of NTI / DCGL strains in a broader autism and related patient population.

Licence Portfolio with DCGL Expanded: NTI announced the expansion of its exclusively licenced portfolio with DCGL to include Alzheimer’s disease, Multiple Sclerosis, Inflammatory Brain disease, and many other disorders besides Autism and Epilepsy.

A Look at the 1HFY21 Results: The company reported a revenue of $30,754 in 1HFY21, down by 15% YoY. It incurred a net loss of $3.62 million during the period, down by 375% YoY. During July 2020, NTI entered an exclusive option deal to purchase licence for the application of proprietary cannabis strains from Dolce Cann Global Pty Limited (DCGL) for the medical treatment of autism, epilepsy, and others. In September 2020, NTI issued securities via shareholder approvals and completed the licence acquisition transaction. In December 2020, NTI met the DCGL milestone 1 and issued an additional 33 million shares as per at $0.03 per share.

During 1HFY21, NTI issued 100 million ordinary shares at $0.05 per share to raise $500k. It held a cash and cash equivalents balance of $2.02 million as of 31 December 2020.

1HFY21 Result Highlights (Source: Company Reports)

Key Risks: The company faces the risk of COVID-19 on its business development activities, commercialising the technology and its uses, as well as raising capital for developing the project.

Outlook: NTI looks forward to commencing the first clinical human trial on ASD children to test the efficacy and results of its multiple cannabinoid (all-inclusive) plant with <0.3% THC in ASD children. Its patient recruitment for the trial has been encouraging and NTI will commence the study imminently.

Stock Recommendation: The stock of NTI gave a positive return of ~68.88% in the past three months and a positive return of 484.61% in the past six months. The stock is currently trading towards its 52-weeks’ high level of $0.084. The stock of NTI has a support level of ~$0.059 and a resistance level of ~$0.103. On a TTM basis, the stock of NTI is trading at price to book value multiple of 25.6x, higher than the industry (Healthcare Equipment and Supplies) average 7.1x, and thus seems overvalued. Considering the current trading levels, significant returns in the past three-months and past six-months, and valuation on a TTM basis, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry levels and give an “Expensive” rating on the stock at the current market price of $0.076 on 31 March 2021.

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

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