Equity Research | Pharmaceutical and Consumer Health | Small Cap August 10, 2018
Patrick Smith | Analyst | Ubika Research Patrick@UbikaResearch.com | 1 (416) 574-0469
Maxim Medvedev | Associate | Ubika Research Max@UbikaResearch.com | 1 (647) 936-6692
Isodiol International Inc. (CSE:ISOL) is a leveraged CBD-hemp seed-to-sale producer trading at a discount
Market Data (CSE:ISOL)
Price (August 09, 2018) $3.30
52-Week Range:$2.20 – $21.40
Market Cap (M) $130.9M
Shares Outstanding 40M
Free Float 88.5%
Average Daily Volume (3 months) 250K
Total Debt (M)* $7M
Cash (M)* $15.5M
Headquarters Vancouver, BC., Canada
Management and Insiders 13%
Horizons ETFs Management2%
Marcos Agramont CEO, President & Director
*As of Q4/2017 (Year-End March 31) All figures in CAD unless otherwise stated. Source: Thomson Reuters
Isodiol International Inc. (CSE:ISOL)
Isodiol International Inc. (“Isodiol”) specializes in the production of pharmaceutical and consumer products with a focus on CBD nutraceuticals that are derived from hemp. Isodiol manufactures over 30 different products using 99.5%+ purity pharmaceutical grade cannabinoids, which it distributes domestically as well as globally. The Company’s diverse product portfolio includes nutraceuticals, clinically proven anti-aging skin care and beverages.
- In April 2018, the Company’s CBD was certified as an Active Pharmaceutical Ingredient (API). The API license given by the U.K.’s Medicines and Healthcare Products Regulatory Agency differentiates Isodiol from the rest of the producers, as it allows the Company to expand CBD applications beyond nutraceuticals and topicals, into pharmaceutical drug development and clinical trials.
- Isodiol produces the highest-quality CBD isolate on the market. Isodiol’s CBD extract is derived from top-quality European Certified Organic Hemp. The Company has exclusive contracts with the Academy of Agriculture Science Department, allowing them to test and produce a variety of hemp. Their facilities operate on state-of-the-art equipment, like the highperformance liquid chromatography, resulting in the conversion of their raw extracted oil into a 99%+ pure isolate crystal, which is then used in a variety of their consumer products. The whole process of producing and testing is supervised by an experienced scientific team, ensuring the highest quality and safety of hemp-derived CBD products available on the market.
- Isodiol expects to increase CBD production by 10x from the current capacity of 2,000 kg/year to 20,000 kg/year. The Company is constructing what it believes to be the world’s largest CBD production facility located in Yunnan, China. Isodiol expects the facility to be up and running by Q1/2019. The initiative to increase production is part of Isodiol’s expansion strategy, as they increase their presence in over-the-counter and pharmaceutical drugs, while pursuing international expansion into Latin America, Asia and Europe.
Financial Analysis & Valuation
Isodiol has a healthy balance sheet, with continued revenue and quarterover-quarter EBITDA growth. For the past year, Isodiol has seen a consistent increase in their revenues, totaling $19,137,266 for the Fiscal Year Ended March 31, 2018, compared to Fiscal Year Ended March 31, 2017 revenues of $355,959. For Fiscal 2019, Management is anticipating a profitable year end, with Q1 results to be released at the end of August. In addition, Isodiol believes it has a strong balance sheet with $24,069,692 in cash and acquisition deposits, allowing the Company to facilitate continued growth.
We are initiating coverage of Isodiol with a blended estimate of $6.15/share. ISOL currently trades at 2.2x our 2020 EBITDA estimate of US$42.8M and at 0.58x our NAV estimate of US$4.64/share, a discount to intermediate cannabis producers, which trade at an average of 3.9x 2020 EV/EBITDA.
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