Bod Australia Limited

BDA Details

Australia-Wide Medicinal Cannabis Study Commenced: Bod Australia Limited (ASX: BDA) distributes and markets two premium brands and products for the skincare, beauty, and health industries. As on 16 July 2020, the market capitalization of the company stood at ~$24.67 million. The company has recently commenced an Australia-wide, multi-clinic, open-label observational study of its medicinal cannabis range, MediCabilis™, for indications including anxiety disorders, insomnia, and Post Traumatic Stress Disorder. It aims to collect data from 500 patients who will be prescribed MediCabilis™ over a 12- month period. Bod anticipates that each patient will be prescribed MediCabilis™ three to four times over the course of the study, which will add to the company’s growing cannabis prescription sales pipeline.

Record Fourth Quarter Revenue of $2.5 Million: For the quarter ended 30 June 2020, the company has reported record revenue of $2.5 million, which accounts for ~42% of the total revenue currently booked for FY2020. This demonstrates that the company is generating growing, diversified and sustainable revenue streams.

Growth in Revenue (Source: Company Reports)

What to Expect: BDA seems well-primed for growth and is planning to introduce new products and enter new markets. It expects increasing revenue in the coming years, following the final calculation of royalty payments receivable from Health & Happiness Group International Holdings Limited.

Key Risks: The consolidated entity’s activities expose it to a variety of financial risks- market risk including foreign currency risk, price risk and interest rate risk, credit risk and liquidity risk. Unpredictable financial markets may pose potential adverse effects on the financial performance of the consolidated entity.

Stock Recommendation: The company has filled 3,459 prescriptions in FY2020 and has seen an upward trajectory in prescription volumes, demonstrating traction of MediCabilis’™. As per ASX, the stock of BDA is trading close to its 52-week’ low level of $0.120, proffering a decent opportunity for accumulation. During 1H20, gross margin of the company witnessed a substantial increase over the previous half and stood at 61.9%. In the same time span, current ratio of the company went up to 4.88x from 2.37x in 2H19. On a TTM basis, the stock is trading at a price to book value multiple of 3.1x, lower than the industry average (Consumer Non-Cyclicals) of 4.9x. Considering the attractive trading levels, record quarterly revenue and upward trajectory in prescription volumes, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.270 on 16 July 2020.

BDA Daily Technical Price Chart (Source: Refinitiv, Thomson Reuters)

Medibio Limited

MEB Details

Extension of Entitlement Offer: Medibio Limited (ASX: MEB) is engaged in the development of diagnostic heart rate variability technology for mental health diagnosis. As on 16 July 2020, the market capitalization of the company stood at ~$14.82 million. The company has recently closed the Fully Underwritten Non-Renounceable Entitlement Offer and has received applications for 100,263,197 new fully paid ordinary shares for total subscriptions of $601,579.28.

Quarterly Update: During the quarter ended 31 March 2020, the company made decent progress despite the outbreak of COVID-19 pandemic and submitted a 510K application for sleep staging medical software, MEBsleep to the FDA. The company made significant progress with the commercialization of ilumen™. With limited financial resources, management focused predominantly on global entities with the capacity to distribute ilumen™ widely. During the quarter, the company’s cash receipts from customers amounted to ~$24,000, with cash balance at the end of the period amounting to $1.02 million.

Quarterly Statement of Cash Flows (Source: Company Reports)

Key Risks: The closure of sleep clinics across America because of the outbreak of COVID-19 crisis has hindered the progress of the company’s depressive burden trial. The main risks arising from the group’s financial instruments are credit risk, interest rate risk, foreign exchange risk and liquidity risk.

Stock Recommendation: The corporate mental wellbeing app is beginning to gain market traction. Participation rates in ilumen™ have been as high as 75%. The company is also expecting to complete the development of mental health app for the consumer market by March 2021. As per ASX, the stock of MEB gave a return of 61.77% in the past three months and a return of 83.33% in the last one month. The stock is trading at attractive levels and retains limited potential for growth. However, investing in the stock can be risky as the performance is dependent on the progress made in clinical trials. Considering the current trading levels, softer market conditions due to the COVID-19 pandemic, and low market capitalization, we suggest investors to keep an eye on the business activities of the company and have a watch stance on the stock at the current market price of $0.012, up by 9.091% on 16 July 2020.

MEB Daily Technical Price Chart (Source: Refinitiv, Thomson Reuters)

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