BOD achieves record FY21 - so why is the share price down?
Our cannabis stock Bod Australia (ASX: BDA) released a positive quarterly report earlier in the week showing things are heading in the right direction.
The report confirmed BDA had a record year for revenue and it reduced its cash burn - quarterly revenue is up 20%, with FY revenue up 23%.
BDA’s cash burn is down 11% compared to last quarter.
Despite the positive financial momentum, BDA is trading at its lowest levels in 2021 - around the 33c mark.
We invested in BDA at 48.5c. We liked the fact that BDA was already generating revenue, and was trading at a lower revenue multiple compared to its peers.
Compared to earlier in the year, the medical cannabis sector has been on down trend, and BDA’s share price has been no different.
We are long term investors in BDA and have a multi-year time horizon.
We are hoping BDA’s share price can get some upward momentum soon that matches its improving financial performance.
Whilst revenues are solid, BDA is still burning a fair amount of cash and is not yet cash flow positive.
Once the company can bring in more cash from sales than it spends, this would be a massive turning point for the stock.
Another factor contributing to BDA share price weakness could be due to the cannabis sector being somewhat flat at the moment.
A lot of medical cannabis stocks are trading at much lower levels compared to the start of 2021, so it looks like the sector is in the doldrums at the moment.
Positive medical cannabis sector news such as regulatory environments improving will also generate interest in BDA - for example the news of a new US Senate proposal to legalize marijuana that would let cannabis companies use banking services and trade on major stock exchanges, is a good sign for BDA and the sector as a whole.
The BDA Basics
BDA is a cannabis focused healthcare company with an established revenue base from two verticals:
- Medicinal cannabis - sold via prescriptions, supported by clinical trials, and health professional education and awareness
- CBD and hemp consumer products - sold off the shelf, BDA’s products licensed to Health & Happiness Group Limited (H&H) globally to accelerate sales.
BDA’s Quarterly - Key Points
Contributing to BDA’s record figures in the previous quarter are:
- $2.24M in customer receipts - Up 20% from the previous quarter,
- $6.62M in total unaudited receipts in FY21 - Up 83% increase from the previous year
- 12,187 products dispense - Up 212% from the previous year
- $7.4M in total unaudited FY2021 revenue - Up 23% from the previous year.
- BDA has reduced its cash burn by 11%
- BDA has $8.07M in the bank to put towards its growth initiatives.
- 63% of medicinal cannabis products sold during the quarter were the result of "repeat prescriptions" - this highlights the quality of BDA’s medicines and its attraction to doctors and patients as an alternative treatment to medical issues.
The company has already signed its first binding purchase order for the US market for its CBII range and intends to expand across the United Kingdom through new stockists.
With a total of $935,000 in binding purchase orders from H&H on hand at the end of the period for Italy and the US, which are expected to be delivered in the coming weeks, the new year will be off to a great start.
Its maiden A$312,000 binding purchase order from exclusive global partner, H&H for CBD products for the US market is the first of multiple binding purchase orders expected and is the start of BDA’s US expansion.
Why we invested in BDA
We think the medical cannabis space has significant growth potential. We were drawn to BDA for the following reasons:
✅ Modest market cap: BDA has a current market cap of $35M, which is a fraction of other ASX medicinal cannabis stocks, including the $109M Cann Group, the $107.5M capped Althea Group Holdings and the $265M capped Ecofibre Ltd.
✅ Attractive entry price: The stock is currently trading at around 34c, providing an opportunity to take a position at a steep discount to the 55c price sophisticated investors recently invested at.
✅ Founder and CEO Jo Patterson has a high % ownership: We met with Ms Patterson a number of times and were impressed by her skills and experience. She is the company founder and is the third largest shareholder of BDA - we like it when management has significant ‘skin in the game’, as there is additional motivation to succeed.
✅ Aiming to be cash flow positive by end of 2021: BDA has solid revenues, costs are being managed well, and is on track to deliver on this target.
✅ Global product distribution in place: Exclusive global distribution partnership with Swisse brand owner Health & Happiness Group Limited (H&H Group) gives BDA significant muscle, and can help accelerate BDA’s growth. This week's news is clear evidence of that.
BDA is focused on a number of revenue generating objectives and growth initiatives during this quarter and beyond, including:
- Progress US market entry with H&H following receipt of initial binding purchase order
- International market and product expansion with H&H under new and existing brands
- New product launches under the CBII brand in the US, UK and other established markets
- Continued growth of MediCabilisTM prescription sales in Australia, as well as scale up of UK operations
- R&D initiatives to further build on the growing body of evidence for the use of MediCabilisTM
- Finalise product registration strategy for new schedule 3 CBD products in the Australian market.
- Start trials to test the efficacy of its medicinal cannabis product suite in the treatment of Long COVID-19
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.