Elixinol Share Price up on Quarterly: But Is Its Growth Slowing?

At time of writing, the share price of Elixinol Global Limited [ASX:EXL] is up 1.45% trading at $3.50.

The Elixinol share price registered a small gain today after four straight losing sessions:

ASX EXL Price Chart

Source: tradingview.com

The company released its quarterly report today which outlined continued growth. However, this growth has occurred at a slower pace as it transitions to higher margin products.

If you are new to the sector, or looking for a new way to approach it, our free ASX-listed cannabis stocks report is great place to begin your research or expand your knowledge. That can be downloaded here.

Elixinol share price rises on open, growth more subdued than previous quarters

The Elixinol share price rose as high as $3.60 in early trading, before settling lower.

These were some of the key highlights from the quarterly:

  • Q2 FY2019 revenue of $9.9 million, 19% growth PCP, 18% QoQ
  • Acquired 25% of Pet Releaf
  • Raised $50 million to expand in the US
  • Nunyara (Aussie medicinal operation) granted manufacturing license
  • CBD Processor Authorisation in New York
  • MedVec distribution agreement for German pharmacies

But this was perhaps the most important bit of info:

Elixinol Global has continuously reported strong quarterly sales growth compared with PCP. In the Company’s March 2019 quarterly update, it communicated its strategic decision to reduce focus on lower margin private label business in the US to enable increased capacity for expected future growth of higher margin branded products and provide the ability to capture further market share. Excluding this private label business, normalised revenue growth for Q2 FY2019 would have been reported at 38% on PCP (normalised revenue growth for H1 FY2019 would have been reported at 34% on PCP).

As you can see below, their growth between 2017 and 2018 was more rapid than this year:

ASX EXL revenue growth

Source: newswire

We note that they went through nearly $17.5 million in manufacturing and operating costs for $8.35 million in receipts from customers.

They still have a healthy cash balance of $48.1 million.

So there is a potential concern about how they monetise their diverse product range, with tapering revenue growth.

Outlook for Elixinol

We noted slowing momentum for the Elixinol share price at the beginning of June.

Since then, the share price has struggled to replicate its form.

There’s frequently a lot of emphasis placed by cannabis companies on value-added products as these are generally seen as higher margin.

And within value-added products there are varying levels of success.

As the company noted in this quarterly, it is seeking higher margin (branded) products, so this is encouraging.

But there is always something to be said for sheer scale. This is something that Cann Group Limited [ASX:CAN] is trying to do with its Canadian offtake agreement.

Food for thought.

If you enjoyed our analysis of Elixinol, be sure to check out our free pot stocks report. It can be accessed here. We cover three unique ways to invest in ASX-listed cannabis companies. You may not have heard of the third stock (hint: it doesn’t even produce cannabis).

Regards,

Lachlann Tierney
For Money Morning

 

 


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. He is involved in three publications:


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