Rich lister’s upcoming hemp IPO eyes profitability

Industrial hemp company Ecofibre Ltd is shaping up to be the biggest name in Australia’s small but fast moving cannabis space.

The company, headed by rich-lister Barry Lambert, is gearing up to list on the ASX by the end of this month with big plans to capitalise on the opening of hemp markets in Australia and the US.

The global hemp fibre market presents serious opportunity with forecasts that it will be worth US$4.4 billion by 2025, up from US$1.7 billion last year. And while hemp still remains strictly regulated in Australia — although the consumption of hemp foods became legal in 2017 — hemp products are now mainstream in the US.

It’s a case of consumers becoming increasingly aware of hemp’s benefits, and regulators responding to make hemp products more accessible.

Lambert, along with CEO Eric Wang, who is a former CEO of $1.7 billion capped Perpetual (ASX:PPT), is seeking to raise up to $20 million at $1 a share for the IPO offering, which would value Ecofibre at more than $300 million.

What’s interesting for retail investors is that, unlike many IPOs, a portion (around 20%) of the raising will be available for the general public — the prospectus is available on Ecofibre’s website.

Wang’s background means he’s well placed to attract some serious institutional funding, and has already secured backing from IMF Investors.

Lambert isn’t without connections himself, having built Count Financial which he sold in 2011 to Commonwealth Bank for $373 million. He’s leveraging his connections with fund managers and high net worth investors who had backed Count Financial to now get behind Ecofibre.

In a strong sign of confidence, Lambert, himself, will hold 24% of the group post-IPO, while Wang will control 18%.

The company has experience in breeding and growing hemp — knowledge that’s been commercialised over the past two years with sales growing rapidly and strong margins across its businesses.

Although the company has run at an $8.7 million loss over the past two years, it is expected to break even this year, before becoming profitable from FY20.

The funds raised will be applied to expand Ecofibre’s businesses, with a strong emphasis on developing its high-tech fibre textile, Hemp Black.

Hemp Black, its industrial use business, focuses on highly innovative solutions across a spectrum of consumer markets including fashion, athleisure wear, healthcare, composites and building materials.

Wang says that this high-tech fibre textile, Hemp Black “is the future”. He explains that there is a broad application of the textile — it can be used in 3D printing, or in hospitals or office furniture as the fibre's anti-microbial properties means you're not spreading germs.

Here’s a video explaining what exactly Hemp Black is:

This business is expected to be a major future earnings driver with its innovative hemp-based products in textiles that Ecofibre is developing in partnership with Thomas Jefferson University in Philadelphia.

Ecofibre’s other businesses are Ananda Health, which produces nutraceutical products and is now at economic scale, profitable and growing rapidly, as well as Ananda Food, which is a major-scale producer of food-grade hemp seed oil, protein and hemp seeds grown from industrial hemp crops in Tasmania.

By owning the whole value chain, from seed to shelf, Ecofibre produces nutraceutical products for human and pet consumption, as well as topical creams and salves via its Ananda Health and Ananda Food brands.

Ananda Professional brings to market the first fully compliant and legal CBD oil product line created specifically for the needs of independent pharmacies and healthcare professionals. This exclusive professional line meets strict safety standards with its pharmaceutical grade full­ spectrum cannabinoids.

Ecofibre has its cannabis-infused products in more than 2000 US pharmacies, and hopes to lift its presence as the big chains like Walmart begin stocking these types of items this year.