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Why this ASX cannabis share raced 4% higher on Friday

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The THC Global Group Ltd (ASX: THC) share price has just finished the week on a high.

On Friday the medicinal cannabis company’s shares climbed as much as 4% higher before ending the day with a gain of 1.5% to 38 cents.

Why did the THC Global share price push higher?

Investors were buying THC Global’s shares after the release of its fourth quarter update on Friday.

That update revealed that cash receipts in the fourth quarter came to $1.87 million. This represents a 30% quarter on quarter increase and a 189% increase on the prior corresponding period.

This led to THC Global’s FY 2019 unaudited revenue coming to $4.79 million, up 81% on FY 2018’s revenue.

The company’s hydroponics equipment business, Crystal Mountain, was the main driver of revenue growth in FY 2019. Management advised that this was thanks partly to the broadening of the Crystal Mountain product offering over the last few months.

It was also boosted by the introduction of new value-add service offerings to cannabis cultivator clients and its expansion across Canada from its current west coast base in Vancouver.

Management appears confident the Crystal Mountain business will continue its positive form in FY 2020. It revealed that it expects its revenue to exceed $7 million on a conservative basis next year.

Medicinal cannabis sales.

Management also appears optimistic that its medicinal cannabis sales could grow in FY 2020.

At present THC Global is an exclusive distributor of Endoca cannabidiol (CBD) based medicines to patients in Australia and New Zealand. Sales of the Endoca medicines have been strong, particularly in New Zealand which has a less restrictive medicinal cannabis access scheme.

But from late in the first quarter of FY 2020, the company will be supplying a full range of Canndeo branded medicines in Australia and New Zealand. This product is being sourced from its own production facility as it scales up and initially supplemented by imported European product through a white labelling agreement with MGC Pharmaceuticals (ASX: MXC).

Furthermore, as production of medicinal cannabis from the company’s Southport Facility scales up, the company will be able to offer price competitive pharmaceutical GMP medicines to Australian patients and the global export market.

At the end of the period the company had cash in the bank of $3.55 million and no debt.

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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 Scott Phillips.

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