AUSCANN GROUP HOLDINGS LTD

AC8 Details

Strategic Partnership Augurs Well for Growth: AusCann Group Holdings Limited (ASX: AC8) is an Australian- based pharmaceutical company that aims to produce high quality, economical and clinical cannabinoid medicines. The loss of the consolidated entity for the half-year ended 31 December 2017, was $4,829,822 (vs 2016: $1,338,257). This loss included $2,712,500 of non-cash share-based payments. The net asset of the consolidated entity decreased to $12,869,746 at 31 December 2017 from $15,014,533 at 30 June 2017. During the first half of the year, AusCann secured its second cultivation licence for its 50:50 Joint Venture with Fundacion Daya in Chile, DayaCann. This licence allowed Dayacann to commence planting crops at its 30-hectare facility which is located at south of Santiago. Fundacion Daya is currently the only licenced producer in Chile, a country that has a supportive framework which allows for the production and distribution of cannabinoid medicines. In December 2017, AusCann announced that DayaCann has successfully planted the second crop which is due to be harvested in the first half of 2018. For the second crop, DayaCann selected the highest yielding strains from the first crop which was harvested in April 2017 and yielded over 400 kilograms of dried cannabis products. AusCann and DayaCann JV is focussed on establishing a fully integrated supply chain in Latin America which will manage the operations from cultivation. In next second half of the year, the company has continued its strong operational momentum with the signing of an agreement with Australian Pharmaceutical Industries (API) for the distribution of AusCann’s cannabinoid medicines. API has the infrastructure in place to distribute to approximately 5,700 pharmacies throughout Australia. Additionally, the Federal Government recently announced to allow export of medical cannabis. This decision will help to increase footprints into international market resulting into topline growth of the company.The stock price has climbed up by about 235.42% in past six months as on March 12, 2018. Considering that the group has good potential but needs to improve in terms of the financial performance at the back of recent developments, we give a “Hold” recommendation at the current price of $1.645
 

Integrated Business Model (Source: Company Reports)
 

CRESO PHARMA LIMITED

CPH Details

Product Development and Launches: Creso Pharma Limited (ASX: CPH) is the first standardised nutraceutical company that has come up with organic hemp extract with CBD, vitamins and zinc aiming to reduce stress and to support mental and nervous function. On financial front, net loss after tax came at $15,076,076 in FY17 as compared to $4,584,239 in FY16. This includes non-cash cost of $8.598 Mn for the share-based payment expenses associated with options, performance rights and shares issued during the year. The company has net cash balance of $12,424,913 in FY17 from $3,046,054 in FY16 and net asset rose to $21,028,634 in FY17 from $3,239,851 in FY16. Creso reported for first revenues of CHF 230,000 (A$311,940) from cannaQIX along with sales of Creso’s animal health product, anibidiol. The marketing and distribution of cannaQIX is based on an exclusive commercialisation agreement under which Doetsch Grether markets the products through its distribution channels. During the year, the company achieved successful commercialization preparation for both human and animal CBD nutraceutical products and this commercialization effort will achieve further key milestone in next year. Hence, we expect that new product developments, product launches and further commercialization agreement will support overall growth of the company.Meanwhile, the stock has risen 64.76% in last six months as on March 12, 2018 followed by a 15.2% fall in last one month. We give a “Hold” recommendation at the current price of $0.865
 

Product Development and Launches (Source: Company Reports)
 

CANN GROUP LIMITED

CAN Details

Added to All ordinaries effective March 19, 2018: Cann Group Limited (ASX: CAN) is building a world class business focussed on breeding, cultivating and manufacturing medicine cannabis for sale and use within Australia and globally. Recently, the company has got the grant of import permits to get genetics and cannabis oils from its Canadian partners. It has also appointed Mr Neil Belot as a Director of the company. On financial performance front, revenue from ordinary activities accounted to $44 K which consists solely of research and development (R&D) credits received during the period. The net loss from ordinary activities increased by $537 K to $1.463 Mn, which is in-line with the business activity. During the first half of the year, the group has raised ~$78 million capital to fund Phase 3 expansion program. Besides this, the group has highlighted that the construction at the Southern facility is largely complete and cultivation is now running at maximum capacity. Furthermore, the company got some boost from the grant of an import/export licence for cannabis genetics and medicinal cannabis products by the Australian Government during the quarter ended December 31, 2017. However, the group would be requiring more works in terms of housing new imported strains at its Southern facility. Work is underway for site selection and planning of the Phase 3 facility. While the stock has been added to all ordinaries effective March 19, 2018, we give an “Expensive” recommendation at the current price of $2.79, at the back of the trading levels.
 

THE HYDROPONICS COMPANY LIMITED

THC Details

Expansion Plans Underway: The Hydroponics Company Limited (ASX: THC) develops and delivers medicinal cannabis and has three main business verticals i.e., Development and delivery of medicinal cannabis, manufacturing and distribution of hydroponics equipment, materials & nutrients, and large scale hydroponic greenhouse design & construction. The company has completed stage 1 of its R&D facility and growing capability in Queensland site. This facility will majorly work on the production of high quality medicinal cannabis which will help to increase bottom-line of the company. Besides this, the company will also provide an onsite laboratory for development of new strains, as well as testing and quality control of harvested products. Distribution agreement with Endoca and Nanolux Technology will help THC to increase top-line growth in years ahead on the back of volume growth across the globe. Given the developments in view of prevailing volatility slightly exacerbated by the resignation of the chief commercial officer (Mrs Debbie Ormsby), we put a “Hold” on the stock at the current price of $0.64
 

Expansion Plans Underway for Canadian Market (Source: Company Reports)
 

STEMCELL UNITED LIMITED

SCU Details

Half year net loss: Stemcell United Limited (ASX: SCU) is a biotechnology company that focuses on the growth, reproduction, culture and extraction of stem cells for medicines, health and beauty application. The Group has recorded revenue of $168,667 in 1HFY18 (up 100%) from sale of Dendrobium Officinale related products while net loss accounted to $1,889,161 in 1HFY18 as compared to profit of $174,277 for the same 6-month period of 31 December 2016. The net loss was incurred due to impairment of intangible asset of $1,284,600 during the same period. The stock price has decreased by 22.22% in past six months and was down by 6.67% in last five days on March 12, 2018, the group needs to be bucking up on the financial performance and unveil progress on cannabis related work. We have a “Hold” recommendation for this stock at the current price of $0.027
 

ZELDA THERAPEUTICS LIMITED

ZLD Details
 
Expansion of pre-clinical pancreatic cancer research collaboration: Zelda Therapeutics Limited (ASX: ZLD) is an Australian based bio-pharmaceutical company that is focused on developing a range of cannabinoid-based formulations for the treatment of a variety of medical conditions. During 1HFY18, ZLD reported 7,782% revenue growth and a narrowed net loss after tax at $496,648 as compared to $5,047,324 in 1HFY17. The company has cash at bank around $6,612,219 as on December 2017. During the period, the company has entered into strategic partnership with CannPal Pty Ltd ensuring to support overall growth of the company in future on the back of promoting and encouraging collaborative activity in human and animal pharmaceutical markets. Recently, ZLD expanded its pre-clinical pancreatic cancer research collaboration with Curtin University, to focus on in vivo animal studies to investigate the effect of a range of ZLD’s formulation in combination with existing chemotherapy agents - Abraxane and Gemcitabine. We expect that these studies will generate highly relevant data for potential future human clinical trials. We give a “Hold” recommendation on this stock at the current price of$0.13

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