The increased popularity of cannabidiol (CBD) has allowed markets for the extract to pop up across the globe, and Australia is no exception.

CBD, a derivative found in the cannabis plant, is now used in everything from pain relief medication to topical face creams, creating a lucrative investing space for marijuana stocks on the Australian Securities Exchange (ASX) as companies attempt to cash in on both national and international financial opportunities for the drug.


Here the Investing News Network (INN) takes a look at the projected growth of CBD stocks on the ASX and some of the players investors may want to keep their eye on as CBD takes root in the country.

 

What you need to know about Tesla's Battery Day

   
Expert Analysis of Tesla's Battery Day and the impact on Battery Metals Investing.

Pros and cons of investing in CBD stocks on the ASX

The global cannabis sector was hit hard over the past summer, and Australia marijuana stocks faced the same sharp decline in value as their international contemporaries.

Canaccord Genuity’s Australian equity analysts Cameron Bell and Matthijs Smith said in a note sent to investors in November that Canaccord’s Australian Cannabis Index fell about 40 percent over four months.

There’s also the issue of the relatively small size and young age of the cannabis market in Australia. The pair from Canaccord called it a case of “smoke without fire.”

The issues facing the Australian cannabis markets lead to a shifting of expansion plans for some Canadian marijuana firms that had previously invested into the country.

Western-Australia-based AusCann Group Holdings (ASX:AC8) lost the backing of Canopy Growth (NYSE:CGC,TSX:WEED) last year after the Canadian company sold off its 13.2 percent interest in AusCann for C$6.3 million.

Althea Group Holdings (ASX:AGH), another Australian company, took a hit after it was discovered by Australian Financial Review that Aphria (NYSE:APHA,TSX:APHA) was looking to sell its stake in Althea after investing in the firm in 2018.

In an interview with Small Caps, Sud Agarwal, CEO of medical cannabis company Cannvalate, said that the challenges facing the cannabis market are tied to a shift in investor strategy.

“The reason I think most of the Australian values have dropped is partly because of a market pivot to more sophisticated plays, recognizing that cultivation is likely to be done by lower cost countries overseas and we’re going to be an import country rather than a grower,” said Agarwal.

There is also the fairly strict federal control of medicinal cannabis to consider, something Agarwal said has proven to hinder the growth of the sector. In his view, local cannabis cultivation isn’t feasible.

“Because we’ve got so much regulation here and the cost to get anything done is so expensive, I think … it will never become cost-effective to grow locally in Australia and use our product to turn into a final product here,” he said.

There have been some wins for the sector, though, despite the setbacks.

Bell and Smith said that, while the early state of the sector in Australia has been marked with the kind of volatility that comes with any nascent industry, medical marijuana has been quickly adopted and patient numbers have soared.

Up until the end of November, the Therapeutic Goods Administration (TGA) has approved over 24,000 SAS Category B applications for unapproved medicinal cannabis products.

And when it comes to CBD, the use of the extract for medicinal purposes has been high.

FreshLeaf Analytics reported that though CBD is only available via doctor prescription, it still makes up one-third of all prescriptions for cannabis-based medicine in its Q3 2019 report.

The report also stated that doctors said they were more likely to prescribe CBD to patients initially before moving onto products with tetrahydrocannabinol (THC).

Product competition has been up as well. FreshLeaf reported that there were 76 products available for doctor prescription in the Australian market in Q3 2019, representing a jump of over 40 percent from the 54 products available in Q1 2019.

  Life Science and Healthcare Investing in 2020 report cover

Coronavirus Investing: An Overview for Investors

 
COVID-19 continues to impact markets across the world. Get INN’s overview of coronavirus investing.
 

Top CBD stocks on the ASX

With the steady growth of the CBD industry locally and internationally, several Australian players have come to the fore to grab a piece of the market while it’s still in its early days.

One crucial cannabis play listed on Australia’s stock exchange has a particularly strong presence in the hemp industry: EcoFibre (ASX:EOF).

The Queensland-based biotech stock boasts a market capitalisation of AU$803.2 million and produces and sells hemp-derived products across the four parts of its business portfolio: Ananda Hemp, Ananda Food, Hemp Black and Ananda Professional. Ananda Professional products are the first fully compliant and legal hemp-derived CBD oil offerings that target the needs of independent pharmacies and healthcare professionals, according to EcoFibre.

EcoFibre’s business also extends to markets outside of Australia through its operations in Kentucky, California and Pennsylvania.

The wide variety of EcoFibre’s offerings, from pharmaceutical hemp extracts and hemp textiles to hemp food products such as hemp flour and hemp protein powder, has made it a key player in Australia’s CBD industry.

There’s also Elixinol Global (ASX:EXL,OTCQX:ELLXF), which has a market cap of AU$93.8 million.

Elixinol Global is benefitted by its large global footprint, which includes its subsidiary, Elixinol USA, a manufacturer of hemp products — from hemp-infused skincare to hemp dietary supplements — in Colorado.

It’s US-based operations have a wide range of CBD offerings, including tinctures, capsules and powders, and the firm is now taking its interest in CBD to the pet care industry.

In August, Elixinol Global announced a manufacturing and supply agreement with Pet Releaf, which produces hemp-derived CBD oils, topicals and treats for pets, following the purchase of a 25 percent equity stake of Pet Releaf in April 2019.

As part of the deal, Pet Releaf will buy a minimum of US$18 million worth of products over 18 months.

Another big player in the CBD space in Australia is Botanix Pharmaceuticals (ASX:BOT), a clinical stage CBD exploration company with a market cap of AU$98.1 million.

Botanix is another of the biotech stocks with ties to the cannabis sector as it seeks to find treatments for skin diseases including acne, psoriasis, dermatitis and rosacea with its transdermal delivery system using CBD. The company is in the process of preparing the first human trials of a proprietary drug system that delivers synthetic CBD-based medicines to the skin.

Botanix recently teamed up with pharmaceutical-grade CBD provider Purisys in a supply agreement that covers Botanix’s need for synthetic CBD as it continues its clinical trials for products in its pipeline.

The company’s research efforts were helped by a grant from the federal government’s AusIndustry department in October, which will be used to create new synthetic and patentable versions of the extract and explore its antimicrobial properties.

Investor takeaway

CBD in Australia will continue to offer an impressive investment opportunity to individuals looking to get in on a budding industry. As the industry for legal cannabis in Australia begins to develop further, marijuana companies will begin to position themselves to take on market share.

With the massive growth of the global CBD market — projected to reach US$22 billion by 2022 according to research firm Brightfield Group — Australia’s marijuana stocks that have zeroed in on CBD as a focus could prove to be an impressive investment option in the stock market.

Don’t forget to follow us @INN_Australia for real-time news updates!

Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

Wall Street Reporter, the trusted name in financial news since 1843, has published reports on the latest comments and insights from leaders at: Tilray, Inc. (NASDAQ: TLRY), Icanic Brands (OTC: ICNAF) (CSE: ICAN), Aurora Cannabis (NYSE: ACB) (TSX: ACB), and HEXO Corp. (NYSE: HEXO)

Cannabis leaders are focusing on innovation in premium branding, global expansion, and tight operational execution in the drive towards profitability. Wall Street Reporter highlights the latest comments from industry thought leaders:

Keep reading... Show less

TransCanna Holdings Inc. (CSE: TCAN) (FSE: TH8) (“TransCanna” or the “Company”) is pleased to announce that it has closed the 2nd and final tranche of its Unit financing. In connection with the closing, the Company issued 1,356,873 Units at a price of $0.55 per Unit, for gross proceeds of $746,280.15. Each Unit consists of one (1) common share and one (1) warrant. Each warrant entitles the holder to purchase one common share of the Company, at an exercise price of $0.75 per share, for a period of two years from the date of issuance. The warrants are subject to an acceleration right that allows the Company to give notice of an earlier expiry date if the Company’s share price on the CSE (or such other stock exchange the Company’s shares may be trading on) is equal to or greater than $1.25 for a period of 20 consecutive trading days. Finder’s fees of $42,542, 3,200 Finder’s shares and 80,550 Finder’s warrants were issued in connection with finder’s fees payable.

In total, the Company raised gross proceeds of $1,757,180 and issued 3,194,873 Units.

Keep reading... Show less

 Sweet Earth Holdings Corp. (CSE: SE) (FSE: 1KZ1) (OTCQB: SEHCF) (“Sweet Earth” the “Company”) is pleased to announce that it has received full Depository Trust Company (“DTC”) eligibility in the United States. On October 20, 2020, Sweet Earth announced that its shares had been listed on the United States’ Over-The-Counter Bulletin (“OTCQB”) under the ticker SEHCF.

DTC status means that Sweet Earth shares are now eligible to be transferred between brokerage accounts within the United States and significantly augments the ease in which American-based investors are able to trade Sweet Earth shares.

Keep reading... Show less

Hill Street Beverage Company Inc. (TSXV: BEER) (“Hill Street” or the “Company”), announces that further to its press releases dated July 21, 2020 and July 31, 2020, the Company proposes to amend the exercise price of 19,405,804 warrants of the Company that were originally issued on July 27, 2018, to $0.10. These warrants are set to expire on December 31, 2020.

The Company had initially proposed a lower amended price, but that proposal was not approved by the TSX Venture Exchange (“Exchange“), however, the Exchange indicated that a $0.10 exercise price, may be more acceptable. Accordingly, the proposed amendment remains subject to Exchange approval.

Keep reading... Show less

Issuance of U.S. Patent No. 10,851,077 covering methods for extracting and concentrating cannabinoids using ultrasound-enhanced solvent extraction bolsters World Class’ intellectual patent portfolio

World-Class Extractions Inc. (CSE:PUMP)(FRA:WCF)(OTCQB:WCEXF) (the “Company” or “World-Class”) is pleased to announced the United States Patent and Trademark Office (“USPTO”) has issued U.S. Patent No. 10,851,077 on December 1, 2020 in relation to the Company’s methods for extracting and concentrating cannabinoids and other target compounds from cannabis using ultrasound-enhanced solvent extraction

Keep reading... Show less