The cannabis or marijuana sector was once one of the hottest investment sectors, with dozens of new ASX pot stocks hitting the market. However, money came out of this sector as fast as it went in. We are now left with an almost "survival of the fittest" scenario, where the companies with share prices that didn't plummet are now pushing the frontier of research, products and patients.
Here are two ASX cannabis shares that are worth watching:
Althea Group Holdings Ltd (ASX: AGH)
The Althea Group share price has rocketed from December 2018 lows of $0.20 to $1.00, at time of writing. The company is a licensed importer and distributor of medical cannabis. Althea is in a rapid growth phase, having obtained an export licence and manufacturing licence. This has allowed the company to begin its medicinal cannabis production in Victoria.
Althea recently announced some key milestones in the form of 1,000 patients being prescribed Althea medicinal cannabis products in Australia and being elected to supply the United Kingdom (UK)'s first national medical cannabis pilot targeting 20,000 patients.
The company has experienced rapid growth in the domestic market, having grown a small customer base of less than 200 patients in July 2018. Althea is looking to leverage its Australian success in the UK, where there is an estimated treatable population of up to 2.9 million patients.
Investors are very bullish about the company's ability to grow its patient base and leverage its production capabilities for its UK business. Althea is well positioned to take advantage of this growing industry.
Elixinol Global Ltd (ASX: EXL)
The Elixinol Global share price has fallen some 30% from recent highs after a $50 million capital raising to accelerate its United States (US) expansion. The company is a US hemp grower that manufactures a range of products, including hemp dietary supplements, hemp foods and medical cannabis.
The company has a highly diversified business model with multiple products sold through multiple sales channels. In FY18, Elixinol highlighted a 121% rise in group revenue to $37.1 million and a maiden earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $0.7 million.
Elixinol raised $50 million in June at the price of $3.90 per share, which represents 10.3% of the company's shares on issue prior to the placement. The capital raising is the main driver of why the share price fell so much in recent weeks. However, I am confident that Elixinol is strongly positioned to continue growing its bottom line through its increasing distribution in US retail chains, expansion into Europe and Japan, and new product developments.
