The Risks and Benefits Involved in Investing in Cann Global Ltd (ASX_ CGB)
Cann Global Limited is one of the leading companies in the global medicinal cannabis industry. Cann global is present in Australia, Canada and Israel. Their aim is to develop strategic partnerships through collaborations with experts and individuals in these countries and other countries to achieve growth.
Cann Global aims to invest into research and development of Cannabis based products that can help people both medically and in their lives generally as well. At present Cann limited is doing research and developing products in
- Hemp cultivation and processing
Cann global is involved in the production of some of Australia’s leading health food brands such as
- EM Wholefoods
- Blanck & Co
- Australian Grown Naturals
- Black Bag
- Organic Markets Direct
These brands are consumed both within Australia and globally. Cann global intends to research and develop more products to introduce into the market for a sustainable and healthy lifestyle.
Hemp Cultivation and Processing
Cann Globals Hemp cultivation and processing division is not only operational in Australia but also in Asia where the conditions for Hemp growth are ideal. Cann global also has a cannabis seed bank.
In Australia where the Cannabis market is still very young and going through the initial phase of infrastructure and capacity building, Cann global has a state of the art hemp seed hulling facility. Cann global aims to differentiate itself from the competition through research and a technology-based foundation.
Why did Cann global decide to differentiate on the side of technology? Because analysis of the Australian hemp market revealed that most of the Hemp seeds available in Australia were of low grade, which resulted in low grade consumer products. Cann global aims to increase the quality of seeds through technology so that the end products used by consumers can also be of high quality.
Cann global owns a 50% joint venture with Pharmcann. This joint venture company is trying to develop 100% plant based skin care products. These products are in various stages of their trial phase and it is expected that once the trial phase is successfully completed, these products will get a green light for large scale production and sale in not only Australia but also other international markets.
The medicine division is responsible for the research and development of medicinal cannabis products. Cann global is researching different medicines, one area that Cann global is particularly interested in autoimmune diseases and their treatment through cannabis-based medicinal products.
According to the official statement, the team of researchers at Cann global is headed by Andrew Kavasilas, who has almost two decades worth of experience of medicinal cannabis use.
Cann global has a 50% joint venture with Canada based Cantab therapeutics limited, this joint venture originated in 2018 and is aiming to import cannabinoid and terpene blend hard pills into Australia. Cann global aims to import 6 products developed by Cantab therapeutics into Australia.
Cann global is also sponsoring a research project with Technion Research and Development Foundation. This project is led by Professor Dedi Meri, the aim of this project is to identify the effects of different cannabinoids on the function of immune cells. This research will allow Cann global to develop more targeted medicines for multiple sclerosis.
The financial performance of Cann global is very similar to that of other companies in this sector. As stated above, the medicinal cannabis sector is in its infancy not only in Australia but across the world wherever cannabis has been legalised for recreational and medicinal uses. This means that at the moment, companies in this sector need to invest heavily into research and development of new products. As a result, this investment into research and development end up spiking up the cost of doing business. Which is why many companies in this sector have net loss instead of a profit. Sales revenue similarly is low because companies at this stage do not have a lot of products to offer.
Cann global has the same story to tell. It has been incurring varying levels of net loss in the last few years. The sales revenue figure goes up and down but it is in the positive territory because Cann global has got a few products that are already in the market. As more products, particularly the skincare line passes through the test phase into large scale production, we should expect the sales figure and thus the net profit figure goes up, probably by the end of 2021.
The liquidity position of Cann global is not very satisfactory. Their liquidity ratios are in the positive but there is a clear indication that the company is barely managing to stay solvent. The net cash flow has shown some signs of improvement but it is still in the negative.
This financial performance does not mean that the company is going bankrupt no. As we have stated in earlier blog posts as well, this is the typical performance of every company in the young and growing sector of medicinal and recreational cannabis. This is a very investment intensive sector at the moment, so we should expect this trend to continue for a few years before all of these companies start churning out profits.
Cann global has got diversity in its product line and its aim is to not only create a global presence but also create strategic partnerships in the form of joint ventures with other companies that can benefit Cann global. This is one reason why Cann global is one of the leading companies in this sector.
For long term investors, who want to invest in Cann global and then forget about their investment for at least two to three years, this is going to be a good choice because there is definitely potential for Cann global to take off once their products pass through the development stage.
There is not enough potential for short term investors looking to make a profit on day to day price changes. The price of Cann global stock has remained fairly calm in the last few years. All in all, Cann global has the potential to hit it big in the coming years.
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