Ann: Quarterly Report and Appendix 4C, page-19

John has upgraded his revenue (+15% to $52.2m), EBITDA (+45% to $8.9m) and NPAT (+58% to $5.7m) numbers in CY19 materially post capital raise and solid Q3 update.

This puts EXL on 3x EV/Revenue, 18x EBITDA, or 37x PE, with revenue growing +159% (we will find out at the result if this growth acceleration has been in the higher margin segment).

 

CY19 has EXL on 37x PE, growing EPS +302%, 22x in CY20 growing EPS +70% - very strong buy in my view. Share price down -15% in the last few weeks, earnings up materially – not going to stay that way for long.

 

 

Next news should be an update on acquisitions/strategic investments, new product launches, US Farm Bill, CY18 result.

 

 

Elixinol Global 

Strong Revenue Growth Continues 

·         Elixinol continued its encouraging growth in the September quarter recording quarter on quarter revenue growth of 27%. Revenues of $10.4m were approximately 11% ahead of our forecast. The revenue result is inclusive of a small currency tailwind from the lower A$.  The strong revenue growth was primarily driven by Elixinol US where demand for hemp derived cannabidiol dietary supplements and skincare products continues to grow.  The result validates the recent capital raise and has resulted in meaningful upgrades to forecast earnings.

·         The recent $40m raise has facilitated several initiatives to underpin future growth.  EXL has now completed the acquisition of land adjacent to the new production facility.  The land is earmarked for future expansion of the plant.  The December quarter will see the company spend a further $6m on fitout and purchase of capital items for the new facility which is also due for commissioning this quarter.

·         The major upgrade to the Elixinol website has now been commissioned and is due for completion within weeks.  The platform will be multilingual and suitable for the US market and European markets.    

·         FY18 revenues are upgraded by $4.7m to $37.8m while EBITDA increases from $1.8m to $3.0m.  Revenues for FY19 and FY20 are upgraded by 16% and 15% respectively.  The resulting upgrades to EPS are modest in quantum, but large in percentage terms as they are off a low base.  Nevertheless, EXL is now forecast to be highly profitable in the forecast period.  We expect the current sales momentum will continue into the December quarter.

·         Following the recent capital raise and the upgrades to earnings following this quarterly update, the target price is increased by 4% to $2.40.  We retain our Buy recommendation.