Unveiling the facts on Cannabis - Are these four ASX Stocks in an undervalued zone AC8, THC, EXL and BOT?

  • Oct 28, 2019 AEDT
  • Team Kalkine
Unveiling the facts on Cannabis - Are these four ASX Stocks in an undervalued zone AC8, THC, EXL and BOT?

Cannabis is a fast-growing industry with a dynamic and rapidly changing prospects, the medicinal cannabis stocks are progressing on the right track to capture investors’ attention and maximum addressable market. Players dealing in medicinal cannabis business are pursuing clinical research unravelling the hidden potential of cannabis as a medicinal product. Government authorities around the world are also legalising medicinal cannabis products manufacturing and consumption offering a range of prospects for investors. Last year in 2018, Canada legalised cannabis products for adult consumption.

Stocks trading at a price which is supposed to be below its intrinsic value are called undervalued stocks. Often investors hunt for undervalued stocks as a part of their investment strategy, considering they offer a margin of safety by not being overpriced. Renowned investor Late Mr Benjamin Graham and his student Mr Warren Buffet has always preferred buying undervalued stocks.

In this article we would be discussing four ASX-listed medicinal cannabis players, THC Global Group Limited (ASX: THC), AusCann Group Holdings Limited (ASX: AC8), Botanix Pharmaceuticals Limited (ASX: BOT) and Elixinol Global Limited (ASX: EXL), that are trading close to their 52 weeks low and could be considered as undervalued stocks.

Let us dive into each of the Cannabis players to know about them in detail.

THC Global Group Limited (ASX: THC)

THC Global Group Limited (ASX: THC), a vertically integrated global pharmaceutical company with a focus on ‘Farm to Pharma’ pharmaceutical model, is engaged in developing cannabis in addition to manufacturing and distributing hydroponics equipment, materials and nutrients. THC Global holds Cannabis Research Licence, a Medicinal Cannabis Licence (Cultivation), and two Manufacture Licences- all three of them being the main cannabis licenses.

Financial Report for the half-year (HY) 2019 Ended 30 June.
  • Revenues generated from continuing operations were $2,136,894 for HY 2019, up 67% as compared to $1,276,698 for the previous corresponding period.
  • Legalisation of cannabis in Canada resulted in the remarkable growth in revenue in HY 2019.
  • Loss from continuing operations after tax attributable to members was reported $5,765,724 for HY 2019, reflecting an increase of 80% as compared to the reported loss of $3,196,156.
  • The loss for the given period grew by $2.57million relative to the loss from the prior corresponding period. This is mainly because of impairment of intangible assets and goodwill in HY 2019.

On the outlook front, THC Global expects to complete the validation of its medicinal cannabis products by 2019 end, which would be followed by supply into Australian and Asian study trials as well as clinical trials in early 2020.

Stock Information

On 28 October 2019, the shares of THC Global were trading, close to its 52 weeks low level at $0.395 (at AEST 2:48 PM), down by 1.25 percent, with a market capitalisation of $54.63 million and 136.57 million outstanding shares. The company had 52 weeks high and low price of $0.630 and $0.375 respectively, with an average (year) volume of 331,862.

AusCann Group Holdings Limited (ASX: AC8)

With a focus on cannabinoid-based pharmaceuticals, AusCann Group Holdings Limited (ASX: AC8) is engaged in bringing innovation with novel products and clinical collaborations within the medical cannabis space.

Highlights from September 2019 Quarterly Activities
  • AusCann advanced market-leading hard-shell capsules for release to clinical trials by the end of 2019 and product development and R&D facility to be constructed by 2019 end.
  • Appointed a well-known cannabinoid clinical research expert, Dr Marcel Bonn-Miller to the AusCann Board as a Non-Executive Director.
AusCann’s Financial Position for the year ended 30 June 2019
  • AusCann’ loss of the consolidated entity was reported at $7,649,221 compared to $7,668,308 for the year ended 30 June 2018.
  • The loss comprised of non-cash share-based payments of $57.943 in comparison to $2,712,500 for 2018.
  • AusCann’s continued operational expenditure resulted in a net asset growth to $41,668,347 as at 30 June 2019 from $14,112,032 as at 30 June 2018.
  • AusCann is positioned well at a financial level to implement on its strategy, which is achieved by $33.4 million capital raising through share placement in July 2018 and $1.9 million share placement in August 2018.

On the outlook front, AusCann aims for market penetration and success leveraging its financial possessions in the most targeted and efficient manner.

Stock Information

On 28 October 2019, the shares of AC8 were trading slightly higher than its 52 weeks low level at $0.280 (at AEST 2:53 PM), moving up by 1.818 percent, with a market capitalisation of $87.19 million and 317.05 million outstanding shares. The company had 52 weeks high and low price of $0.895 and $0.265 respectively, with an average (year) volume of 1,468,388.

Botanix Pharmaceuticals Limited (ASX: BOT)

Clinical stage synthetic cannabinoid company Botanix Pharmaceuticals Limited (ASX: BOT) is a developer of safe and effective topical treatments for severe skin leveraging synthetic cannabidiol’s unique anti-inflammatory, immune modulating and antimicrobial properties.

The company had secured an exclusive license for its innovative technology for direct drug delivery of active pharmaceuticals, Permetrex™. Botanix also has a robust dermatology pipeline for synthetic cannabinoids (CDBs), presently undergoing Phase I and Phase II of clinical trials.

Impact of BTX 1503 Phase 2 Trial Result on Botanix Share Price

In a recent announcement on ASX dated 23 October 2019, Botanix revealed the results from its BTX 1503 acne Phase 2 study trial. The stock had seen immense selling pressure in the last three days while dropping down to a max of approximately 50% (now in a recovering phase with an increase of 6% in stock price as on 25 October 2019), post the release of the trial results that demonstrated reduction in inflammatory lesions. However, the statistical significance was not achieved for this primary endpoint that led to market enthusiast’s disappointment.

On the outlook front, Botanix plans to enter first products into the clinic, in the second half of calendar year (CY) 2019. Botanix’ atopic dermatitis phase 2 patient study would complete registration in fourth quarter of CY 2019, expecting data in first quarter of CY2 020.

Stock Information

On 28 October 2019, the shares of BOT were trading slightly up from its 52 weeks low at $0.125 (at AEST 2:54 PM), up by 8.696 percent, with a market capitalisation of $110.92 million and 964.5 million outstanding shares. The company had 52 weeks high and low price of $0.290 and $0.067 respectively, with an average (year) volume of 6,438,761.

Elixinol Global Limited (ASX: EXL)

Global leader in the cannabis industry Elixinol Global Limited (ASX: EXL) has a focus on trading hemp-derived CBD nutritional supplements. The company also deals in selling hemp food and wellness products in addition to cultivating and manufacturing medicinal cannabis products.

Non-compliant hemp-derived CBD products sold by Elixinol Japan
  • Announced recently on 23 October 2019, EXL mentioned that non-compliant hemp-derived CBD products of the company were being traded by Elixinol Japan.
  • The company conducted a recent review of each global business unit’s operations and following that discovered the breach internally.
  • Presently, it is carrying out an investigation regarding this non-compliance.
  • In Japan, there is a strict requirement on sourcing CBD from only hemp stalk and seed, and the non-compliance relates to this, expecting the investigation including and independent legal expert, to be completed by mid-November 2019.
  • In September 2018, the company had increased its ownership from 10% to 50.5% for $2.2 million in Elixinol Japan.
  • In terms of revenue, Elixinol Japan contributed $1.6 million in H1 FY 2019 (not expecting to contribute to earnings in FY 2019), representing group proforma revenue of $18.3 million (8.7%) for H1 FY 2019.
Financial Summary for First half of the FY 2019 ended 30 June
Stock Information

On 28 October 2019, the shares of EXL were trading close to its 52 weeks low levels at $1.695, down by 0.294 percent (at AEST 3:04 PM), with a market capitalisation of $234.42 million and 137.89 million outstanding shares. The 52 weeks high and low price were $5.93 and $1.57 respectively, with an average (year) volume of 520,363.


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