Ann: Quarterly Report and Appendix 4C, page-44

Elixinol Global (EXL)
1Q18 revenue growth likely to continue
· Following a period of sustained growth at Elixinol US we have upgraded revenues and earnings in the forecast period to reflect our expectation of continued market expansion and revenue growth from the company.
· The company recently reported 1Q18 revenues of $6.6m, the majority of which was earned from Elixinol US. Quarter on quarter, revenues grew by 24.5%. Based on the revised FY18 forecast which now assumes a more realistic 12% compounding quarterly growth rate, group revenues are likely to increase by ~90% (on a proforma basis) relative to the strong double digit percentage growth achieved in FY2017.
· We believe the fundamentals for the CBD nutraceuticals industry continue to strengthen. The FDA is likely to approve the first ever medicinal cannabis product for consumption in the United States later this month. We believe this event will represent an important validation of medicinal cannabis and we expect a flow on effect to sales of over the counter CBD nutraceuticals where the Elixinol brand is a leader in the US market.
· Based on our review of pricing on Elixinol’s US Website and Hemp Foods Australia, prices for leading products are stable. Elixinol also produces bulk product for other retailers. Both the branded sales and bulk sales continued to grow in 1Q18 hence it is not unreasonable to assume margins should be sustained at close to historical levels depending on the mix of future sales.
Upgrade recommendation to Buy
· FY18 revenues are increased by 19% ($5.1m) and EBITDA increases by $1.3m. We now expect Elixinol Global will be modestly profitable in FY18. FY19 and FY20 EPS are largely unchanged.

Price target is amended to $2.16 and we upgrade our recommendation to Buy from Hold.


Recommendation:
Buy
Previous Close:
$1.62
Price Target:
$2.16 (Spec)