Our takeaway for Australia is , yes invest if you are looking at producing for export but be wary unless you have a very long term outlook for the domestic market.
Medical legislation has been in play for a while but it is still a nightmare to access due to levels of government, a disinterested medical profession and a very (very) strong alcohol lobby who see medical as the Trojan Horse for recreational and will do everything in their power to bring the whole thing to a grinding halt. Australians love their cannabis as much as they love their alcohol and that’s worrying too many people at the moment.
Education about cannabis amongst the chattering classes and the politicians is laughable and the media in the main still only run a sick child story or something pertaining to crime if covering cannabis. Culturally there’s a long way to go
Any here’s the Leafly recommendations more at https://www.leafly.com/news/industry/investing-in-australias-cannabis-industry-5-companies-to-watch
Five Companies to Watch
For those looking to potentially invest, I track over a dozen Australian companies that are trading publicly on the Australian Stock Exchange (ASX), though in my view, only five are worth exploring at this time, including AusCann Group Holdings, Cann Group, Elixinol Global, MGC Pharm,a and Zelda Therapeutics. AusCann, MGC Pharma, and Zelda Therapeutics are members of the Global Cannabis Stock Index. Please keep in mind that inclusion here is not a recommendation of purchase.
AusCann Holdings
AusCann Group Holdings (ASX: AC8) (OTC: ACNNF) began trading in February 2017. The company’s ASX page is here, and it recently provided an update on its operations. Canopy Growth (a client of mine at New Cannabis Ventures) is a strategic partner that owns approximately 11% of the shares.
The company is licensed for cultivation, manufacturing, and research, but it currently has no sales. It is pursuing operations in Chile through a joint venture as well as in Australia. The company reported cash of A$12 million as of Dec 31. AusCann has approximately 273 million shares outstanding, giving it a market cap of approximately A$456 million at the recent closing price of A$1.67. The stock has increased 109% in 2018.
Cann Group
Cann Group (ASX: CAN) (OTC: CNGGF) began trading publicly in May 2017. The company’s ASX page is here, and you can access its most recent investor presentation. Aurora Cannabis (a client of mine at New Cannabis Ventures) is a strategic partner that owns approximately 23% of the shares and is reported to be considering an acquisition of the company.
The company is licensed for cultivation and research but isn’t yet generating revenue. It has a cash balance of A$85 million that it is deploying into facility construction. With 139.5 million shares outstanding, Cann Group has a market cap of approximately A$417 million at the recent closing price of A$2.99. The stock, which went public at A$0.30, has gained 9% in 2018.
Elixinol Global
Elixinol Global (ASX: EXL) (OTC: ELLXF) began trading earlier this year. The company’s ASX page is here, and it published an IPO prospectus in November. The company also shared a presentation in February.
Elixinol’s largest business is its US hemp-based CBD company. It also operates Hemp Foods Australia and a newly formed medical cannabis company focused on Australia. In 2017, it generated sales of A$16.5 million, up 62% over 2016, primarily from its US nutraceuticals business. The company reported year-end cash of A$18.8 million. With 103 million shares outstanding and a recent closing price of A$1.72, Elixinol has a market cap of approximately A$177 million. The stock has increased 72% since the IPO in January.
MGC Pharmaceuticals
MGC Pharmaceuticals (ASX: MXC) (OTC: MGCLF) began trading in early 2016 after conducting a reverse merger. The company’s ASX page is here. It provided an operational and strategy update in early March.
The company reported sales of just A$127,377 in the quarter ending Dec. 31. The company has historically focused on dermatological products, having introduced a CBD herbal cream for relief from psoriasis. It is also importing CannEpil, which it will produce in its Slovenian laboratory, to treat epilepsy. The company grows in the Czech Republic and is constructing a production and cultivation facility in Malta. The market capitalization, based on 1.2 billion shares outstanding and a recent closing price of A$0.076, is approximately A$91 million. The stock has declined almost 15% in 2018. It recently raised A$5 million selling shares at A$0.07 in a private placement.
Zelda Therapeutics
Zelda Therapeutics (ASX: ZLD) (OTC: ZLDAF) has traded on the ASX since November 2016. Its ASX page is here. It shared a corporate presentation in November.
The company, which generated sales in the half-year ending Dec. 31 of A$871,762, is focused on research, including pre-clinical cancer and diabetes research as well as clinical trials for insomnia and autism. With 755 million shares outstanding and a recent closing price of A$0.115, the market cap is approximately A$87 million. The stock has increased 24% in 2018.
Bottom Line
While the valuations seem rather high in Australia, the country is in the early stages of its federally legal medical cannabis program—and it’s moving in the right direction. There are several publicly traded companies that also offer the option to buy them with a US trading symbol.
