One of the fastest-growing plants, hemp or industrial hemp, is a strain of plant species Cannabis sativa, cultivated specifically for the industrial uses of its derived products. Hemp contains a higher concentration of cannabidiol (CBD), distinguishing it from cannabis. Hemp can be crafted into a spectrum of products of commercial and industrial usage such as food, textiles, clothing, shoes, paper, insulation, bioplastics, and biofuel. Hemp legalisation varies widely between different geographical regions, and it was legalised for human consumption in Australia and New Zealand in November 2017.
In this article, we would be discussing the latest moves from two ASX-listed hemp stocks - Elixinol Global Limited (ASX: EXL) and Cann Global Ltd (ASX: CGB). Let us zoom into each of these stocks in detail.
Elixinol Global Limited (ASX: EXL)
Elixinol Global Limited, a global leader in the cannabis world, sells hemp-derived CBD nutritive supplements, hemp food as well as wellness products. The company is also engaged in the cultivation and manufacturing activities. Three businesses of Elixinol include-
- Elixinol LLC
- Hemp Foods Australia Pty Ltd
- Nunyara PharmaPty Ltd
Elixinol Reports Normalised Revenue Growth of 12%
Elixinol recently released its quarterly business update on 29 October 2019 for the quarter ended 30 September 2019 (Q3 FY19). Key highlights are mentioned below-
- For Q3 FY19, unaudited group revenue of $9.6 million was reported, which represented a 3% decline on the previous sequential quarter, Q2 FY19 of value $9.9 million and a 9% decline on pcp Q3 FY18 of value $10.5 million.
- In view of enabling increased capacity for the expected future growth of higher margin branded products and provide the ability to capture further market share, a strategic decision was taken to decrease focus on lower margin private label business in the United States, which was unveiled in the company’s March quarter update. Therefore, excluding this private label business, the company reported an increase of 12% in the normalised revenue growth on pcp for Q3 FY19.
Elixinol stayed engrossed in investing capital in key business areas progressing with its strategy as well as focusing to amplify distribution network of branded products using a multi-channel approach to grow revenue and secure market share.
Additional Developments During Q3 FY19
United States of America
- Elixinol branded products generated 52% of US revenues.
- Manufacturing and supply deal was signed with market leading brand Pet Releaf, an innovator of hemp-derived CBD oils, topicals and treats for pets.
- Elixinol secured a 25% share interest in Pet Releaf earlier in April 2019.
- FDA regulatory approval for hemp-derived CDB products is still a challenge.
- Collaborated with PharmaCare for creating a co-branded CBD capsule range to be retailed under the Naturopathica brand. With further product development opportunities, this partnership continues to nurture.
- Signed exclusive distribution agreements with Benelux distributor and Harmonia Life in Finland in August and September 2019, respectively.
- Marketing branded finished goods using healthy hemp derived ingredients
- Latest products belonging to Hemp Food Australia include Hemp burgers, Grounded Nut Butters and Essential Hemp Seed Oil Capsules, which have been stocked in the Australian market through the existing distribution channels.
On 8 November 2019 (AEST 01:58 PM), the EXL stock was trading at $1.480, down 1.333% from its previous closing price. The market capitalisation of the company stands at $206.84 million with approx. 137.89 million outstanding shares. The 52 weeks high of the stock is noted at $5.93, with an average volume of 514,740. The EXL stock generated a negative year-to-date return of 44.24%.
Cann Global Ltd (ASX: CGB)
Engaged in cultivating hemp for the R&D of medicinal cannabis products, Cann Global Ltd (ASX: CGB) offers services in the expanding cannabis markets in Australia as well as across the globe. Cannabis research licence was acquired by the company in February 2017, and the cultivation licence was secured in March 2017.
Institutional Investment Supporting Expansion
- In a recent ASX announcement, Cann Global informed the market that it had undergone an institutional investment to underpin expansion. The company acquired further institutional support from L1 Capital Global Opportunities Master Fund, based in New York. It was agreed that the company would raise $2.22 million after expenditures by issuing 2,600,000 secured convertible notes.
- It was further reported that the earnings from the issue of the notes would be utilised to further increase inventory and production in order to encounter the rising demand on the existing inventory. The funds would also be used for the evaluation and expansion of growth initiatives and for general working capital.
Asian Business Expansion Agreement
As per an announcement dated 28 October 2019, a deed of agreement was signed by Cann Global with Sun Agriculture Promotion Industry and Commercial Co., Ltd Asia Lao PDR. It was informed that the company is intending to expand its APAC/ Asian presence and business activities and has introduced a subsidiary, Cann Global Asia Pty Ltd (“CGA”) focused on Asia, wherein CGA’s management partners, David Evans and Christopher Waldron would drive these business operations. Ten per cent of the gross profit of the products that are either sold locally, or exported and sold, will be paid by CGA to SUN.
The focus of CGA would be
- To undertake cultivation and processing of legal broad-acre Industrial CBD hemp.
- Indoor cultivation and processing operations of Cannabis in South-East Asia legally.
- Cann Global to retain fifty-five per cent majority shareholder status in CGA.
- David Evans and Christopher Waldron to retain 22.5% minority shareholder positions each, respectively.
Highlights from First Quarter of Financial Year 2020 (ended 30 September 2019)
- Infrastructure updates undertaken during 1H 2019 at the Coolum Beach processing facility in Queensland.
- Post the accomplishment of HHC upgrade program, Cann Global anticipates revenues to increase with $281,000 reported for the current quarter. Revenue of value $121,000 was reported for the month of September. Revenues for Costco and EPCO expected to be reported in the next quarterly report.
- On 22 August 2019, Cann Global was reinstated to quotation.
- On 29 August 2019, T12 became official supplier to Costco.
- On 5 September 2019, T12 signed exclusive Vietnam Distributorship with EPCO.
- Invested $1.1 million through its research division, towards the Research on MS being undertaken by the Technion Haifa.
- A new state-of-the-art Bio Health facility was established in Silverwater. In preparation for its Canntab and Pharmocann Pharmaceutical and Nutraceutical product range, this facility is undertaking a Schedule 8 (S8) drugs and poisons approval fitout, with manufacturing expected in 2H 2019.
- Invested substantial funds into Hemp Seed Research and the company intends to continue to support and help its farming partners by offering ‘on the job’ training, agronomic and soil advice, as well as assistance in hemp crop farming management practice.
- Cann Global also secured over 200 metric tonnes of hemp seed from its contracted farmers to supply its flourishing hemp food division.
On 8 November 2019 (AEST 02:37 PM), the CGB stock was trading flat at $0.02. The market capitalisation of the company stands at $63.24 million with approx. 3.16 billion outstanding shares. The 52 weeks high of the stock is noted at $0.051, with an average volume of around 10.73 million. The CGB stock generated a negative year-to-date return of 31.03%.
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