Love Hemp Group Plc

Love Hemp Group Plc (NXX: LIFE) is an investment Company based out of the United Kingdom. The Company is making investment in cannabidiol (CBD), hemp and medicinal cannabis.

Investment Highlights – Love Hemp Group Plc – Avoid at GBX 4.08

• Despite the improved financial performance in H1 FY2020, the Company needs to manage operating expenses more effectively unless in will have negative impact on future financial performance.
• As per valuation metrics, Price/Book Value multiple of the Love Hemp Group Plc is currently higher as compared to the corresponding multiple of the Pharmaceuticals industry, reflecting overstretched valuations.
• In the last one year, the Company delivered a negative return of ~54.67% and delivered lower returns compared to the benchmark Index.
• From the technical standpoint, shares were trading below the short-term support level of 20-day simple moving average prices of GBX 4.70, which reflects a downtrend in the stock and can decline further.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• Moreover, failure to adopt the technological changes can reduce the level of business. 

Recent News

On 16 April 2021, Love Hemp Group announced that its Independent Director Non-Executive, Charles Lamb will step down effective from 16 April 2021.

On 8 April 2021, Love Hemp Group announced a successful completion of gross fundraise of £5 million to boost global marketing programme and is intended to list on LSE during 2021.

Financial Highlights – H1 FY2021 (31 December 2020) (released on 31 March 2021)

(Source: Interim Report, Company Website)

• In the first half of the financial year 2021, the Company’s revenue increased significantly by 557% to £2,379,144 along with increase in total expenses.
• Driven by higher revenue, the profitability margins for the period improved. The Company managed to reduce net loss to £962,171 in H1 FY2021 (H1 FY2020: Net loss of £9,835,551).
• The cash balance as on 31 December 2020 declined to £78,977.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company has shown a significant improvement in financial performance in the first half of the financial year 2021. Both the revenue and the bottom-line performance improved, while profitability remained in the negative zone. The Company has a well-positioned balance sheet, while liquidity position declined for the period. Love Hemp Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and improving the liquidity position. The stock made a 52-week low and high of GBX 1.00 and GBX 14.52, respectively.

Based on the above rationale, we have given an “Avoid” recommendation for Love Hemp Group Plc at the current price of GBX 4.08 (as on 19 April 2021 at 8:34 AM GMT), with support from few catalysts, needs to be evaluated at a later stage such as utilisation of additional liquidity raised.

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