Stemcell United Limited

SCU’s Cooperation Partner HFIH Received China Hemp Licence: Stemcell United Limited’s (ASX: SCU) stock climbed up 52.174 per cent on June 07, 2018 after the announcement that its strategic partner, Yunnan Hua Fang Industrial Hemp Co Ltd (HFIH) has received an industrial hemp licence in China. This licence will allow HFIH to engage in planting, processing, and selling of industrial hemp related products in China (high CBD, low THC cannabis strains). Further, the licence is a significant step forward for SCU in allowing HFIH to access high-quality cannabis seeds that SCU could use for stem cell research into manufacturing TCM (Traditional Chinese Medicine) cosmetic cannabis products. In addition, SCU’s cooperation with HFIH will also allow SCU to use HFIH’s Import-Export Licence to import its TCM beauty products into China and supply through HFIH’s distribution network. Besides this, the group plans to manufacture some of its TCM beauty products in China and this import-export licence will allow SCU to export from China to Hong Kong, Singapore and Australia. SCU has a Co-operation Agreement and an exclusive right to own a 51% interest in HFIH. On the balance sheet front, the current ratio of the company stood at 2.88x as at December 31, 2017, representing high liquidity of the firm.Moreover, cash and cash equivalent at the end of the quarter was $ 1,909 against $ 779 of the previous quarter. This improved cash position will help to further business development events.

With the grant of the aforesaid licence, we expect some boost to the top-line growth of the company in years to come while it is still early to say how SCU will implement its strategies on product development and marketing. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 0.035, despite the huge dip in one year (i.e., 75.66% as at June 06, 2018).
 

SCU Group Structure (Source: Company Reports)

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