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THC Global Group Ltd: DEEP DIVE
OVERVIEW

THC Global grows 32% in 2018 after acquisitions and approvals

THC is developing its medicinal cannabis strategy in Australia, New Zealand and Canada and is looking to Asian markets.
A cannabis plant shown next to an oil-based product
OVERVIEW: THC The Big Picture
THC’s farm-to-pharma model aims for vertical market integration for the cannabidiol company
  • Final regulatory approvals are expected in Australia
  • Medicinal cannabis has increasing legitimacy and investor support in sections of the investment community
  • THC has the option of export to additional cannabidiol export markets in Asia
  • Acquisitions and strategic partnerships continue to be on the cards for THC
  • Subsidiary Crystal Mountain can grow with medicinal cannabis grower markets

What does THC Global do?

THC Global Group Ltd (ASX:THC) (FRA:9TH) (OTCMKTS:HDRPF) specialises in medicinal cannabis supply and development and hydroponics equipment manufacturing and distribution. It was previously known as The Hydroponics Company Ltd and is run by Ken Charteris, group chief executive officer, with three decades experience in biotechnology and pharmaceutical company leadership.

He has managed companies with revenues of more than $200 million and asset bases of up to $500 million. Charteris is instrumental in executing the company’s strategic plan and is focused on acquisitions and alliances for the dual-listed group.

What does THC Global own?

THC Global is a rapidly growing company which went from having $1.1 million issued capital on January 1, 2017, to $23 million of issued capital on December 31 last year.

Growth in issued capital last year was $5.5 million or 32%.

The Australian company’s main pharmaceuticals focus is on the development and delivery of cannabidiol (CBD) products to the Australian and New Zealand markets, and the Canadian markets through wholly-owned subsidiary Vertical Canna Inc.

In November now-THC supplied Endoca CBD products to its first prescribed Australian patients.

The supply verified THC’s product pathway from manufacturer to patient under federal authorised prescriber and special access schemes and state regulations.

THC imports four products from Endoca’s range: Endoca’s CBD oil in 3% and 15% concentrations; and Endoca’s unique CBD-plus-CBDa oils, also in 3% and 15% concentrations.

The company is also exploring strategic opportunities in the Asian region.

It is transitioning into a full-scale domestic operation having secured most of the licensing and permitting approvals it needs to implement its farm-to-pharma business model.

THC has already begun cultivation activities having received permits for the cultivation and R&D site owned by its subsidiary Canndeo.

A manufacturing licence for this site is expected to facilitate product validation and study trial production.

On the group’s existing manufacturing front, a second core company activity is in the manufacture and distribution of hydroponics equipment, materials and nutrients.

Group CEO Ken Charteris is executing the company’s strategic vision and has advanced it over the past 2.5 years by driving the acquisition of THC’s existing manufacturing facility and securing commercial partnerships with Endoca (Europe) and Ascent Industries (North America).

THC Global’s hydroponics equipment subsidiary Crystal Mountain expects to grow significantly as the business enters the retail market to supply equipment to micro-cultivators and new markets.

The company’s bio-manufacturing facility, acquired less than a year ago, was valued at $2.55 million on a May 1 transaction date and now has a balance sheet value of more than $16 million.

THC’s revenues for the 2018 fiscal year grew $820,103, or 45%, to $2.7 million, when compared to the prior financial year — the 2017 fiscal year.

Cost of goods sold increased $838,433, or 79%, to $1.9 million in the 2018 fiscal year.

Gross profit declined by $18,330, or 2%, to $759,758 in 2018.

Total comprehensive profit came in at $1.7 million for the year, a $4.3 million or 167% improvement on the $2.6 million total comprehensive loss of 2017.

The overall result was partly due to a $10.3 million gain on the revaluation of land and buildings, net of tax.

THC expects $2.2 million of cash outflows in the March quarter as it directs $638,000 to product manufacturing and operating costs.

The company ended 2018 with $6.3 million cash.

Inflection points

  • Regulatory approvals progress in Australia
  • Increased legitimacy and success of medicinal cannabis markets and ongoing investor support
  • Expansion of cannabidiol export markets to additional markets in Asian countries
  • Pharmaceutical industry mergers, acquisitions and strategic partnerships, related to THC and more broadly
  • Growth of subsidiary Crystal Mountain in line with the emergence of newly-opened medicinal cannabis grower markets

Global group CEO Ken Charteris pleased with manufacturing progress

“Q4 2018 has been a pivotal quarter for the company focusing on developing a vertically-integrated global cannabis business and marking the company’s transition into production mode as its domestic facilities receive final licensing and permitting required,” THC Global group CEO Ken Charteris said in late January.

“We are pleased to see first plants on site at our manufacturing and cultivation site, and look forward to commencing the first stage of our manufacturing activities to support the domestic market with a view to our larger facility being used to pursue export opportunities.”

 

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