Hey guys here are my thoughts on the Q1 2018 results as released today, let me know what you think.
Some things I noticed:
1.
"In Q2, 2018, a further $2million in funds provided by the Company will be invested in capital equipment as part of the program to finalise a Growing Licence application and the planting of its first crop shortly thereafter."
Is this the first time we have heard about this investment? It should be noted that this is listed as a loan in the cashflow statement. As per the initial acquisition notice the deal was to be as follows:
"Creso is acquiring Mernova for three milestoned cash payments of C$1.8 million (A$1.82 million) and three milestoned issues of Creso shares to the value of C$8.3 million (A$8.38 million)."
Apart from this the construction of the facility seems to be on target.
2.
"Creso’s flagship animal health product anibidiol® was successfully launched in Switzerland by Virbac SA (EPA: VIRP) in November 2017. Following the launch of the product feedback from veterinarians and pet owners has been very good. Initial order revenues of CHF70,000 (AUD$93,000) have been recorded since launch. Further launches of anibidiol® in other European markets is anticipated in 2018 with revenue expected to continue to increase. "
Compare this to the Q4 2017 update given on 31/1 where the company received $14000AUD for anibidiol sales since its launch on November 14th 2017.
Using the above we see for the launch period of November-December the sale of anibidiol was $14kAUD over 1.5 months or $9.33kAUD per month, as per today's update on Q1 2018 the anibidiol sales represent an average of ($93kAUD - $14kAUD)/3 (the figure is stated as "since launch") = $26.33kAUD per month, a growth in average monthly sales of almost 200%, to me this is a very promising sign that the product is being well received.
I'm still not really sure when CannaQIX was launched leading to the ann "Creso reports first revenues..." released 27/2 2017.
"cannaQIX® has contributed to Creso’s first revenues of CHF230,000 (A$311,940) along with sales of Creso’s animal health product, anibidiol®, following the launch of that product in Switzerland in November 2017. "
So I can't comment on and compare the sales figure mentioned in today's Q1 results, maybe someone can fill in the blanks for me here:
"Revenues from initial order of cannaQIX®10 of CHF140,000 (AUD$187,620) have been recorded. "
As well as the above I noticed that the "Receipts from customers" in the financials totals $188kAUD which seems to exclude the anibidiol sales? If anyone can clarify this for me it would be great.
"In January 2018, Creso secured a commercial agreement with UK-based healthcare group Precision Healthcare Ltd to market and distribute cannaQIX®10 and 50 products in the UK. The UK launch is planned for Q1 2018."
This appears to have been delayed as seen in today's ann:
"Creso announced in January the conclusion on a commercialisation agreement with Precision Healthcare Ltd for the distribution of cannaQIX®10 (as well as the therapeutic grade cannaQIX®50) in the UK, which will provide access to the product via 5,000 points of sale in the UK. The UK launch of cannaQIX®10 is anticipated in July 2018. "
4.
"Creso is planning to launch cannaDOL® in Europe starting with the UK in Q1 2019 representing the company’s entry into the global sports and osteoarthritis sector. "
This is a more specific and more immediate time frame (albeit still a while away) than the initial launch ann which stated the below:
"The cannaDOL® product range is planned to be launched with commercial partners in the first half2019"
"Creso has completed its development into an initial line of three innovative cannabis terpeneinfused Swiss made functional chocolates. The company is in the process of exploring a production and global marketing agreement with Felchlin Swizerland.
The agreement will enable a wide commercialisation of the product range and is expected to be signed in Q2 2018."
I don't know anything about this company but they look pretty decent after a quick skim, it is also good to see such a close time frame for this, hopefully sales will come shortly after.
6.
"The first test batches of the beverage range of products are expected to reach selected markets in May/June 2018, with commercial sales expected to be ready for shipments in Q3 2018. "
It is good to see some clarification on this date since the 18/4/18 ann which stated:
" [CLV is] planning to have its first beers and tonics on sale in Europe and Canada during the summer, with global sales to follow thereafter. "
Creso continues with its proposed acquisition of Kunna Canada Ltd. and its wholly-owned Colombian subsidiary, medicinal cannabis group Kunna S.A.S. (formerly Cannalivio S.A.S). In April, the parties agreed to extend the end date of the Heads of Agreement (HOA) for the proposed acquisition from 30 April 2018 to 31 May 2018.
In regards to Kunna it appears that the extension of the HOA was due to a delay in receiving the cultivation license. The original extension of the HOA was confusing as it stated both "the parties have agreed to extend the end date of the Heads of Agreement (HOA) for the proposed acquisition from 30 April 2018 to 31 May 2018." AND "Following receipt of this licence, Kunna applied for a licence to cultivate medicinal cannabis in Colombia and it expects this licence to be granted in April 2018.". As it will soon be May it is easy to conclude the company is still awaiting the cultivation license and this was the cause for the extension.
Creso has $11MMAUD at the end of Q1 2018 with an expected cash burn rate of ~$4MMAUD of which $2MM is a loan to Mernova. If we see zero growth in sales from CannaQIX10 and anibidiol over the next quarter we will see revenue of ~ $188kAUD CannaQIX + $79kAUD anibidiol from Switzerland alone, it is my opinion that zero growth in sales is unlikely. In combination with this through the upcoming launch of the terpene chocolate range, beverage range, UK launch of CannaQIX10, and expansion of the anibidiol range we look to be in a healthy standing coming into Q2 and through Q3.
Let me know what you guys think,
T&H
CPH Price at posting:
83.5¢ Sentiment: Buy Disclosure: Held
