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Share Watch – Lynas down and cannabis prospect – 16 May 2021

The Lynas share price started April trading at $6.17. It reached its highest closing price for the month on 8 April, when it finished the day’s trade at $6.50. Currently, the Lynas share price is sitting at $5.44. So, what has caused its poor performance lately? Let’s take a look at what the rare earth producer has been up to.

In its quarterly activity report, Lynas highlighted the growing demand for rare earth minerals for use in renewable energy and electric vehicle technology. Its production levels of Neodymium and Praseodymium were similar or greater than the previous quarter’s, and it received $110 million in sales revenues, partly due to a delay in cash collection from the prior quarter.

While this all sounds positive, the report also noted the company’s subdued sales due to the COVID-19 pandemic’s impact on trade, as well as shipment delays caused by the Suez Canal blockage.

Further, the company reported that several Chinese rare earth producers, including the leading global rare earths supplier China Northern Rare Earth Ltd, are planning to increase their production. China Northern, which produces around 60% of China’s total rare earth supply, wants to double its production by 2024. China already has a small monopoly on rare earth production, with Lynas being one of only a few producers located outside of the country.

Despite Lynas dubbing the quarter’s results “strong”, after their release, the company’s share price retreated. On the day the results were announced, Lynas shares closed the session 8% lower than the day prior. Over the following days, the Lynas share price continued to fall.

Despite the woes felt by Lynas shareholders this month, the company’s share price is still performing well on the ASX overall.

Currently, it’s up 31% year to date. It’s also up by a mammoth 222% over the last 12 months.

The company has a market capitalisation of around $4.9 billion, with approximately 901 million shares outstanding.

Bod Australia (ASX: BDA)

BDA has announced its highest ever monthly sales for its medicinal cannabis prescription products. BDA is a cannabis focused healthcare company with an established revenue base from two verticals:

  1. Medicinal cannabis – sold via prescriptions, supported by clinical trials, and health professional education and awareness

  2. CBD and hemp consumer products – sold off the shelf, BDA’s products licensed to H&H Group globally to accelerate sales.

BDA filled a total of 1,789 MediCabilis™ prescriptions in Australia last month – an 11% increase in the month of March. BDA attributes this growth to its Australia wide clinical study to test the efficacy of MediCabilis™ when prescribed for conditions including anxiety, insomnia, and Post Traumatic Stress Disorder (PTSD).

On the CBD consumer side, BDA has an exclusive global partnership with H&H Group, a multi-billion-dollar Hong Kong listed company, that owns a number of powerful consumer brands in the health and wellness space, including the market leading Swisse brand in Australia.

H&H Group also operates one of the largest e-commerce channels for nutritional products in Europe and North America, which means BDA already has international reach and a competitive advantage against its peers.

BDA products are being sold in the UK, Netherlands, and Italy, with further expansion in the UK now imminent. We see significant upside as BDA has also recently launched itself fully into the US market.

The company announced itself to the US on the back of a maiden $312,000 binding purchase order – the first of multiple binding purchase orders expected in the coming months – from H&H Group for CBD products for the US market.

The US market for CBD consumer products was expected to reach US$1.8 billion in 2020, and grow to US$6.9 billion by 2025, making it four times larger than the UK.

The US market entry will be an exciting development for BDA. It may also mark the start of a significant share price rerating.

Financial indicators

The VIX fear gauge up since 9 May by 2.12 points to 18.81 but still in the safe risk zone.

The Dow Jones Industrial Average down 492.72 points or 1.41% since 9 May to 34,382.13, the STOXX 600 down 2.40 points or 0.54% to 442.53 and the Shanghai Composite index up 71.51 points or 2.09% to 3,490.38.

Gold up to 1,843.80. US 10-year Treasury Bonds creeping up to 1.626 and oil up to 65.51. Cryptos Bitcoin down by 9,653 points or 16.27% to 49,665.

ASX 200 down 66.60 points or 0.94% since 9 May to 7,014.20 today. The Aussie dollar down to 77.78 US cents.

Eco Market Spot Prices

LGC $35.50

STC $38.85

ESC $30.75

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