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Hemp play Ecofibre to hit the boards

Hemp play Ecofibre to hit the boards
Access to the IPO is reserved to a selected number of funds and top-end shareholders, and I expect strong demand due to its high quality board and growth potential.
Mar 19, 2019 By Simon Herrmann Tags: IPO, EOF

Australia has legalised the sale of low-psychoactive hemp seeds as a food product in November 2017 and hemp has been gaining popularity ever since.

When people think of hemp or marijuana they often think of a drug to smoke, however the versatility as well as the positive health effects of hemp as a nutrient are well documented. Hemp contains for example more protein than quinoa and approximately the same amount as soybeans, around 25% protein. In addition, most essential amino acids as well as vital oils and vitamins are present.

In order to be considered a food ingredient hemp seed has to contain less than 0.5% of the psychoactive ingredient tetrahydrocannabinol (THC) – which is the key differentiator to marijuana.
The coming listing of Ecofibre Limited offers Australian investors the opportunity to gain exposure to the fast-growing industrial hemp industry.

Ecofibre operates in USA and Australia, targeting slightly different segments of the market. In the USA, the company operates in the hemp derived nutraceutical sector targeting the health and well-being segment via its Ananda Health brand. In Australia, the primary focus is on hemp-derived food products supplying hemp seed foods via the Ananda Food brand. Ecofibre also has a research and development arm with the aim to commercialise hemp-related fibre products.

Ecofibre is involved in several parts of the value chain, from growing to manufacturing up to the sales and marketing of its products, which include protein powders, dehulled hemp seeds or hemp oil.

The company is chaired by Count Financial Founder Barry Lambert, Ecofibre's largest shareholder with a 24 per cent stake at the maximum subscription.

Ecofibre has experienced explosive revenue growth in recent years – from $600,000 in the financial year 2017 to $5.7 million in the financial year 2018. For the half year 2019, Ecofibres revenues increased over 400% on an annualised basis to $13.3 million,

Listing at a market capitalisation of over $300 million, it is fair to say that ongoing growth is essential to support the company’s valuation. As Ecofibre appears on track to finish 2019 close to break even, analysts and investors alike will likely expect profits from 2020. Legislation and growth risks are the primary hurdles.

Access to the IPO is reserved to a selected number of funds and top-end shareholders, and I expect strong demand due to its high quality board and growth potential.

Ecofibre Limited
ASX Code: EOF
Shares on Offer: 20m
Listing Price: $1.00
Market Capitalisation: $309.3 million
Listing Date: 29th March

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Simon Herrmann Author: Simon Herrmann Mar 19, 2019

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.


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