MGC Pharmaceuticals Ltd shares have doubled in value in a month

Although the market has sunk lower today, that hasn’t stopped the MGC Pharmaceuticals Ltd (ASX: MXC) share price from racing higher.

At lunch the cosmetic cannabis company’s shares are up 7% to 7.9 cents, stretching their one-month return to over 100%.

Why are its shares racing higher today?

This morning MGC Pharmaceuticals’ 51%-owned subsidiary MGC Derma announced the receipt of its formal purchase order from South Korea-based Varm Cosmo for cannabidiol (CBD) cosmetic products.

This is the first binding sales agreement to be executed with the cosmetics company and is for a minimum contracted volume of $8 million of product. Two more agreements are expected to be closed in the coming weeks, with a further two agreements being finalised.

These will ultimately bring the total value of the agreements to $40 million.

What’s next?

In my opinion it really does all depend on the success of these products in the South Korea market.

The South Korean cosmetics market is not just lucrative, but also very influential. If the products, which will be white-labelled and sold as part of Varm Cosm’s range, are a success, then there’s every chance that they could end up being sold all over the world and even in Australian Pharmaceutical Industries Ltd (ASX: API) operated Priceline stores.

This could put MGC Pharmaceutical in a position to deliver explosive sales growth over the next few years.

However, as promising as this is, I would suggest investors wait to see how well the products sell before making an investment.

In the meantime I would suggest investors check out these high-flying small-cap shares with explosive growth potential.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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