Ecofibre successfully lists on the ASX

By Meagan Evans. Published at Mar 29, 2019, in Small Caps

Ecofibre (ASX:ECO) is the ASX’s latest entrant in Australia’s small but fast moving cannabis space.

The industrial hemp company, which listed on the ASX today, is seeking to capitalise on the opening of hemp markets in Australia and the US.

The company is capped at $309 million on listing, after raising $20 million at $1 per share via the IPO.

The business is headed by rich-lister Barry Lambert, who is best known for building Count Financial, which he sold in 2011 to Commonwealth Bank for $373 million.

Lambert too is leveraging his connections with fund managers and high net worth investors who had backed Count Financial to get behind Ecofibre. And, along with CEO Eric Wang, who is a former Perpetual (ASX:PPT) CEO, Ecofibre has the right connections to attract some serious institutional funding, and has already secured backing from IMF Investors.

In a strong sign of confidence, Lambert, holds a 24% stake in the group, while Wang controls 18%.

Ecofibre has experience in breeding and growing hemp — knowledge that’s been commercialised over the past two years with sales growing rapidly and strong margins across its businesses.

And although the company has run at an $8.7 million loss over the past two years, it is expected to break even this year, before becoming profitable from FY20.

The funds from the IPO raised will be applied to expand Ecofibre’s businesses, with a strong emphasis on developing its high-tech fibre textile, Hemp Black.

Hemp Black, its industrial use business, focuses on highly innovative solutions across a spectrum of consumer markets including fashion, athleisure wear, healthcare, composites and building materials.

Wang says that this high-tech fibre textile, Hemp Black, “is the future,” and there is a broad application of the textile. The fibre's anti-microbial properties means you're not spreading germs so it can be used in 3D printing, in hospitals or for office furniture.

This business is expected to be a major future earnings driver with its innovative hemp-based products in textiles that Ecofibre is developing in partnership with Thomas Jefferson University in Philadelphia.

Ecofibre’s other businesses are Ananda Health, which produces nutraceutical products and is now at economic scale, profitable and growing rapidly, as well as Ananda Food, which is a major-scale producer of food-grade hemp seed oil, protein and hemp seeds grown from industrial hemp crops in Tasmania.

By owning the whole value chain, from seed to shelf, Ecofibre produces nutraceutical products for human and pet consumption, as well as topical creams and salves via its Ananda Health and Ananda Food brands.

Ananda Professional brings to market the first fully compliant and legal CBD oil product line created specifically for the needs of independent pharmacies and healthcare professionals. This exclusive professional line meets strict safety standards with its pharmaceutical grade full­ spectrum cannabinoids.

Ecofibre has its cannabis-infused products in more than 2000 US pharmacies, and hopes to lift its presence as the big chains like Walmart begin stocking these types of items this year.

Consumers are becoming increasingly aware of hemp’s benefits and regulators responding to make hemp products more accessible.

While hemp is not yet recognised as a farming commodity and still remains strictly regulated in Australia, legislations is loosening with changes to the Food Standards Code making hemp seed products available for sale as a food since November 2017.

In the US, the passing of the 2018 Farm Bill last December saw industrial hemp removed from the Schedule I controlled substances list, so can be grown as freely as any farming commodity.

The global hemp fibre market presents serious opportunity with forecasts that it will be worth US$4.4 billion by 2025, up from US$1.7 billion last year.

The share price at midday was $1.50, 50 cents above its issue price, having hit $1.61 earlier in the day.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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