2019 EXL stock plummet – perfect time to break into cannabis market ?

Introduction into Hemp Market

Hemp. The word in the cannabis market that instantly grabs our attention. So, what is Hemp? Hemp is from the Cannabis Sativa plant. Sativa contains Tetrahydrocannabinol (THC). THC at high concentrations has profound narcotic effects. However, Sativa with low THC (<0.3%) is deemed harmless and is legal to cultivate.

The useable components of Hemp include the inner fibres, outer fibres, and the hemp seeds. Hemp seeds and fibres have significant and far-reaching industrial applications. Some examples include textiles, paper, rope, fuel to even food (hemp seeds), and clothing. Despite the versatility of hemp, it seems that the regulatory hurdles and market risks have put a hold on the Australian Hemp train.

Intro – Elixinol Global Limited (EXL)

EXL globally interacts with the cannabis industry through its subsidiaries Elixinol, Hemp Foods Australia, and NUNYARA.

Elixinol USA is a manufacturer and global distributor of hemp dietary supplements and skincare. In 2017 Elixinol USA was rated as growing the highest quality hemp by the CBD Oil review. Elixinol USA’s ability to distribute Hemp across 40 countries is partly due to its high-quality reputation. Elixinol Global (Elixinol USA and Elixinol Japan) raked 32.5 (87%) million in revenue in 2018.

Hemps Foods Australia (HFA) is a certified wholesaler, retailer, manufacturer, and exporter of Hemp products. HFA produces an extensive range of 43 hemp products. Including Hemp seeds, Hemp flour, Hemp oil, Hemp Burgers, Hemp protein, and even a SATIVA skincare. Hemp foods raised 4.9 million (13%) in 2018 alone.

NUNYARA Pharma is an Australian hemp-medicinal cannabis subsidiary of EXL. Early this year, Nunyara Pharma bought 60 acres in northern NSW for possible medicinal cannabis growth. The Australian Office of Drug Control (ODC) granted Nunyara Pharma a license to manufacture medicinal cannabis for extracts and resin. The manufacturing license and land acquisition is a step in the right direction. However, the company has one final hurdle. Nunyara Pharma still waits for approval on a license to cultivate and produce medicinal cannabis.

EXL 2019 Stock price movements

EXL experienced a steady rise from the back end of 2018 ($1.93) to March 2019 ($3.15). However, in mid-March to April EXL surged from $3.15 to $5.64. EXL’s share increase was due to revenue growth.  . EXL had reported $18.3 million in revenue for the first half of 2019. Which was a 19% increase in comparison to the first half of 2018. The 18.3 million in sales is representative of January to June. However, it was the launch of initiatives in March and April that increased the share price. For example

Elixinol (USA)

  • US Hemp Authority certification received
  • Increased distribution of Hemp through national retail chains
  • The investments in marketing and e-commerce
  • Expansion of operations in Europe and Japan
  • First Large EU distribution agreement was signed – April 2019

Hemp Foods Australia

  • Sativa Skincare products launched in health stores and online
  • New product development in progress HFA launched Consumer packaged Hemp burgers early 2019 in Woolworths

All this good news, so why the drop in share price?

The plunge in share price can be credited to EXL’s rise in operating expenses and significant decreases in cash flow. However, the financial position is due to the increasing expansion and operation of medicinal cannabis and Hemp facilities worldwide. EXL’s costly development will only prove beneficial in the long term.

The future

To conclude, despite the subsidiaries driving up revenue this year, investors should be cautious for now. It is recommended that investors watch the regulatory progress in Australia and other countries where EXL operates and retails. Primarily because legislative changes are to have the most significant effect on the share price. Moreover, EXL’S strategy to explore the demand for Hemp and medicinal cannabis in Asia, beyond Japan, could see the company become a significant exporter to the Asian-Pacific.

The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Written by associate Patrick McLoughlin

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