The Australian Stock Exchange (ASX) has been heating up this past year with medical marijuana stocks. It began with changes to federal legislation regarding cannabis for medical purposes; first, allowing it to be prescribed for medical cases and second, permitting the cultivation and exportation of the substance, pending the proper licenses and clearing of regulatory hurdles.
On a commercial level, cultivation and exportation of marijuana could mean huge business for marijuana stocks in Australia.
Take price per gram estimates, for instance, where a single gram of marijuana could sell for $7.50 retail. If a business sells 10 tons at this price, they could rake in $75 million. And that’s a modest estimate, considering the street price is roughly triple in value. One of the hitches could turn out to be oversupply, owing to the fact that cannabis is only a commodity, after all, and may be easily grown in backyards. But, the potential value remains undeniably high.
None of the marijuana stocks companies on Australia’s market have generated anything resembling significant revenues, so, the question remains: Is there legitimate opportunity for investors to receive and sustain capital gains, or, is this a get-rich-quick scheme for the gullible?
To try and answer that question, take a look at a few of the marijuana stocks companies currently leading the local Australian market.
Marijuana stocks company: Cann Group Ltd (ASX: CAN)
Investors may be familiar with this Australian MMJ company, in part, due to its involvement with Canada’s powerhouse grower, Aurora Cannabis Inc. (ACB.TO). Back in December, Aurora moved to further its own expansion in the industry by increasing its stake in Cann Group, from 19.9 to 22.9%. Shares were purchased for CAD$1.90 each. Prior to this, Aurora was already the largest shareholder for the company. After the announcement, Cann Group shares rose 4.7% on the ASX, ending at A$3.14 the same day.
Notably, Cann Group stands among Australian marijuana stocks companies as the first to be licensed for the research and cultivation of marijuana in the medical sector.
This high standing of licensing was immediately rewarded with a rise in stock values.
The company’s import/export license will allow it to send its locally grown crops to Canada for testing and analysis. As for imports, Peter Crock, the company’s CEO, reportedly has detailed plans for Cann Group to pull in a variety of cannabis products to sell alongside its own products.
Australia’s Office of Drug Control is still searching for a way to streamline the country’s exportation process for cannabis, so, no formal government process is currently in place. In the meantime, a generic drug-export scheme enabled Cann Group to receive its license. The license will be up for renewal 12 months after its issuance and the company still requires a permit to proceed with cannabis exports. This remaining red tape did not dampen investors’ spirits, however, and share prices rose 15% following the announcement of the company’s license.
Cann Group’s year-end quarterly report came in showing no revenues and a $929,000 loss in operating cash. Still, the company raised $60 million in capital over the same quarter, with partial funds directed toward construction of giant cultivation facilities, which includes 16,000 square meters of greenhouse development in Victoria.
Marijuana stocks to invest in: Auscann Group Holdings Ltd (ASX: ACH)
Another leading Australian MMJ company is Auscann Group Holdings, whose goal is “targeting medications for neuropathic and chronic pain in Australia and Chile, whilst exploring global export opportunities.” The company’s marijuana stocks shares have increased 200% in value from last year, though, it has not yet reported revenues and its operating cash loss for the end of 2017 quarter was $1.2 million.
Auscann’s financials only tell one part of the story; the other part is this marijuana stocks company’s market value, which is more than $225 million.
Marijuana stock to buy: Creso Pharma Ltd (ASX: CPH)
This medical cannabis company, listing on the ASX back in November 2016, is focused on cultivating “CBD nutraceutical therapeutic products,” akin to cannabis-based dietary supplements, for both the human and animal health markets. Their aim with animals is to develop products for the veterinary market that will help alleviate anxiety and pain in animals.
Their year-end quarterly sales were a mere $14,000, with $2.78 million in operating cash outflow. However, Creso Pharma also ended the quarter reaping $12.3 million cash in hand from a CAD$5.5 million “loan” to Minerva Medicinal Inc., a young medical marijuana business based in Canada. By late February, Creso reported earning $311,900 from its first sales of cannabis products.
One issue the marijuana stocks company faces, along with cash outflows, is dilution of shares.
Creso made recent headlines for its decision to provide services to corporate partners in exchange for issuing a surplus of 3 million new shares, further highlighting the dilemma.
Due to the marijuana stocks share options available, it has been complicated to establish the company’s market value. In an end of the year company report, Creso documented 83.14 million ordinary shares. With each share trading around 88 cents these days, Creso’s average market cap is $75 million.
Marijuana stocks Australia: The Hydroponics Company (ASX: THC)
A smaller Australian medical marijuana stock, also benefiting from expanded license grants issued from The Office of Drug Control, is The Hydroponics Company. After making an announcement last week of the company’s subsidiary, Canndeo, being granted a license to cultivate and produce cannabis, the company’s stock value climbed to an all-time high of AU$0.33 per share, from its low of AU$0.20.
The Hydroponics Company began, and has continued, to build its business on manufacturing hydroponic equipment and selling it to cannabis growers.
As Australia’s cannabis growth has slowed, becoming more concentrated and focused on technology, the marijuana stocks company needed to branch out.
It’s year-end quarterly numbers reported $821,000 in cash receipts and $925,000 in operating cash loss. As at the end of the quarter, The Hydroponics Company claimed $11.03 million in cash on hand. Among the company’s plans are investing in facilities for cannabis cultivation, to meet some of Australia’s growing demand for marijuana for medical patients, as well as serve international patients.
As of this Thursday, company shares were up again at $0.685, a 6% increase. THC remains a small fish in a big pond when it comes to market value, sitting at $54 million.
(For more information on marijuana stocks to invest in, read Hiding in The Weeds: 2 Lesser-Known Marijuana Stocks.)