The Damstra Holdings Ltd (ASX: DTC) share price has started the week on a high.

In morning trade the integrated workplace management solutions provider’s shares are up 4% to $1.78.

Why is the Damstra share price racing higher?

Investors have been buying the company’s shares this morning following the release of a presentation ahead of its virtual annual general meeting.

At the event, Damstra’s Executive Chairman, Johannes Risseeuw, spoke about the company’s strong performance in FY 2020.

As a reminder, in FY 2020, the company delivered a 47% increase in revenue to $23.5 million. This was underpinned by strong demand from existing customers and an increase in customer numbers from 129 to 279.

Mr Risseeuw was particularly pleased that 90.7% of its revenue is now recurring, with churn levels under 0.5%. He believes this “demonstrates the high quality of our revenue, the importance of our solutions to deliver a safe working environment and the commitment of our customer base.”

Pleasingly, the company has started FY 2021 strongly and the chairman appears confident on its prospects.

He commented: “We have entered FY21 with great energy and excitement and presently integrating the Vault transaction which is ahead of our internal planning. We see this as a year of continued evolution with our business having size, scale and increasing product innovation effort to accelerate domestic and international growth. From an investor perspective, this is important as we believe we have reduced our overall risk profile while increasing our organisational capability.”

FY 2021 guidance.

Management has reaffirmed its guidance for FY 2021 and continues to expect revenue of $33 million to $35 million. This represents year on year growth of 60% to 70% and includes the benefits of the Vault acquisition.

In respect to earnings, the company is forecasting earnings before interest, tax, depreciation and amortisation (EBITDA) of $5 million to $7 million. This compares to underlying EBITDA of $4.8 million.

Management notes that its underlying EBITDA margin will soften to 15% to 20% in FY 2021 from 23.4% last year. This is due to the Vault acquisition. It explained that its margins will be impacted due to transaction costs and Vault previously operating as an EBITDA negative business. However, it stressed that Vault will not change its financial business model.

More reading

• Wilson Asset Management thinks these 2 small cap ASX shares are a buy
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• Why the Damstra (ASX:DTC) share price is climbing higher today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings Ltd. 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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The Zip Co Ltd (ASX: Z1P) and Afterpay Ltd (ASX: APT) relationship almost feels like a sibling rivalry, except one is stealing the spotlight and delivering a far superior performance.

Looking back, buy now, pay later (BNPL) shares, more broadly speaking, were able to set fresh record all-time highs leading into the August reporting season on the back of unrelenting bullishness for the sector. The BNPL sector reached a near-term peak in August that was followed by a subsequent selloff. This may have been due to full year results that were arguably already ‘priced in’ and increasing competition from the likes of payments giant PayPal Holdings Inc (NASDAQ: PYPL) and local banks. 

Fast forward to today, the Afterpay share price has lifted almost 40% from the August sell-off. It cruised past the $100 per share mark with ease while the Zip share price continues to linger at 6-month lows of around $6. Here are some reasons as to why the Afterpay share price continues to dominate Zip. 

Superior growth performance 

For the most part, Afterpay has been able to deliver superior growth across all financial and operational metrics. In FY19, Afterpay delivered a 140% increase in transaction volume and 115% increase in revenue compared to the respective 108% and 138% from Zip. In FY20, Afterpay’s transaction volume increased by 112% and revenues increased 103% compared to respective 87% and 91% from Zip. 

Increasing global expansion 

Zip currently rivals Afterpay in terms of its international footprint with operations in Australia, New Zealand, South Africa, the United States and the United Kingdom. At face value, Zip does operate in more countries compared to Afterpay. 

However, Zip does not report on the individual performances of New Zealand and South Africa. This is likely due to the minimal revenue contribution from its smaller markets. In Zip’s FY20 report, the company did mention that it had “over 200 merchants integrated to-date” in South Africa. This compares to its 27,600 merchants in Australia and 6,800 merchants in the US. 

By comparison, in Afterpay’s FY21 first quarter report, the company revealed that its acquisition of Pagantis, a European BNPL provider, was “progressing well” and “on track for completion by the end of the 2020 calendar year, pending regulatory approval by the Bank of Spain”. Pagantis will provide Afterpay with immediate licence to operate in Spain, Fance, Italy and Portugal as well as pending licence passport applications in Germany and Poland. 

Afterpay’s plans to expand into Asia are also progressing well with an established base in Singapore to drive its development in the South East Asia market.

More reading

• Afterpay (ASX:APT) share price lower after responding to ASIC report
• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• 2 fast-growing ASX tech shares to buy
• 5 things to watch on the ASX 200 next week
• 3 ASX shares rated as buys by brokers

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. 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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Think Childcare Ltd (ASX: TNK) advised the ASX today that it has received a non-binding and indicative buyout proposal from private equity group, Alceon Group Pty Ltd.  The offer is for 100% of Think Childcare’s shares, and the indicative offer price currently stands at $1.351 – a premium on the current share price of $1.31. 

The Think Childcare share price opened today at $1.31, up by 4.8%, after the announcement.

More details about the offer

Alceon Private Equity has indicated it is willing to offer all cash, or a combination of cash and unlisted shares in a newly incorporated holding company. 

Think Childcare has granted Alceon a period of exclusivity until 18 December 2020 to complete its due diligence process. The company says the transaction is subject to various conditions such as regulatory as well as shareholder approval. As such, it has requested its shareholders not to take any action at this time.

What is Think Childcare and why might it sell the business?

Think Childcare owns and operates childcare facilities in Australia. It focuses on operating its 30 long day childcare facilities for children between the ages of 6 months and 6 years old.

The company has faced difficulties this year as coronavirus lockdown restrictions also closed down many of its childcare centres. As a result, the company is under pressure to service its debts. The latest balance sheet data for 30 June shows that Think Childcare has $35.8m liabilities that are due within a year, and $211.9m in the year following.

 Although Think Childcare holds $11.8m in cash and has $8.48m of receivables due within 12 months, the much larger liabilities figure is casting a towering shadow over its liquidity and current market cap of just $76 million.

Think Childcare share price performance

As mentioned, childcare centres were among the first businesses shut down by the government when the pandemic struck. The Think Childare’s share price went from $1.41 at the start of 2020 to 60 cents by the end of March, at the height of the restrictions. The share price has since regained much of its value. It is trading up 4% at $1.30 at the time of writing.

More reading

• 2 top ASX healthcare shares that could be market beaters
• Afterpay (ASX:APT) share price lower after responding to ASIC report
• Here’s what big brokers think about the Commonwealth Bank (ASX:CBA) share price 
• $278m fashion retailer debuts on ASX today
• Suncorp (ASX:SUN) share price higher after trading update

Motley Fool contributor Eddy Sunarto 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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One area of the market which has performed exceptionally well over the last decade has been the healthcare sector.

Since this time in 2010, the S&P/ASX 200 Health Care index has risen a remarkable 450%. This compares to a more modest ~39% gain by the S&P/ASX 200 Index (ASX: XJO) over the same period, excluding dividends.

The good news for investors is that there are a number of healthcare shares that have been tipped to continue to outperform the market. Here are two:

Nanosonics Ltd (ASX: NAN)

One thing the pandemic has taught us, is that infection control is very important. This bodes well for infection prevention company Nanosonics. It is the name behind the industry-leading trophon EPR disinfection system for ultrasound probes. It is also aiming to launch several new products in the near future which have similar addressable markets. Though, it is worth noting that these launches continue to be delayed.

Nevertheless, one broker that thinks investors should be patient is UBS. The broker believes Nanosonics is a high-quality and structural growth story and expects the company to benefit from post-COVID infection prevention tailwinds. Its analysts have put a buy rating and $7.20 price target on the company’s shares.

ResMed Inc. (ASX: RMD)

ResMed is a sleep treatment-focused medical device company that has been growing at a very strong rate over the last few years. This has been driven by its industry-leading products in a sleep treatment market that is growing fast. Pleasingly, management remains confident on its outlook and notes that there are an estimated ~1 billion people impacted by sleep apnoea worldwide. From these, it believes just ~20% have been diagnosed.

Analysts at Credit Suisse believe the company is well-placed for growth and have recently upgraded ResMed’s shares to an outperform rating with a $31.00 price target. It believes ResMed is well-placed to benefit from a shift to home healthcare following the pandemic.

More reading

• Where you could invest $20,000 into ASX shares today
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• Top brokers name 3 ASX shares to buy today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited and ResMed Inc. 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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The Afterpay Ltd (ASX: APT) share price is trading lower on Monday after responding to a report by ASIC.

At the time of writing, the payments company’s shares are down 0.5% to $101.40.

What did Afterpay announce?

This morning Afterpay responded to the latest report from ASIC in relation to the Buy Now Pay Later (BNPL) industry.

The company notes that the report highlights ASIC’s new product intervention power and the forthcoming design and distribution obligations that will play an important role in promoting good consumer outcomes.

The report also comments that there is a significant role for industry self-regulation, with broad industry support and commitment to ensure good consumer outcomes.

Afterpay notes that this is consistent with the Government’s Senate Select Committee on Financial Technology and Regulatory Technology, which recommended regulation that is fit-for-purpose and considers the various emerging products and business models.

Furthermore, ASIC’s report recognises the significant shift from traditional forms of payment and the decline of credit cards usage. Consumers are benefiting from more choice as competition from newer players is expanding a previously narrow, bank dominated payments industry.

Why Afterpay is different.

In respect to the BNPL industry, ASIC’s report refers to BNPL as a collective term to describe a range of new businesses with fundamentally different business models.

And while Afterpay is easily the largest of the companies profiled with 73% of the total value of BNPL transactions, it represents a relatively small proportion (27%) of BNPL related consumer debt.

Management advised that this is a result of Afterpay’s differentiated business model that is unlike traditional credit or other BNPL providers, with built-in consumer protections that ensure average transaction values remain the lowest. Afterpay’s average transaction value is $147, compared to others with as much as $8,000.

It also notes that payment terms are strictly short-dated, 6-8 weeks versus up to 60 months, and customers cannot revolve in large or accumulating amounts of debt.

In addition to this, it notes that customers are immediately suspended from using Afterpay if they miss a single instalment payment. And unlike other providers, Afterpay does not rely on customers to drive revenue, generating the majority of revenue from merchants (over 85% in FY20). Further, Afterpay customers prefer debit cards over credit cards, with over 90% of all transactions in Australia linked to debit cards.

Management points out that key metrics relevant to positive consumer outcomes have continued to improve since ASIC’s review period (2018 – 2019). One of these is Afterpay’s Gross Loss, which is currently industry leading (<1% globally in FY 2020). Another is late fees as a percentage of underlying sales, which has reduced to <14% globally in FY 2020.

Financial stress.

The release advises that ASIC’s consumer research identified the potential for financial stress among users of different financial products categorised as BNPL.

However, Afterpay’s own research of 144,000 customers found that there is no causal link between spending on Afterpay and changes in spending on essentials.

It notes that for customers who find themselves in trouble, Afterpay offers a generous and accessible hardship program where flexible payment timelines with no additional fees or cost can be agreed upon. Furthermore, Afterpay has never enforced a debt nor does it sell debts to collection agencies.

The company concluded: “Afterpay looks forward to participating in the Government’s upcoming review of the regulatory architecture of the Australian payments system, including whether the general policy and regulatory framework adequately accommodates new and innovative technology, such as the BNPL sector.”

“Afterpay remains committed to our customers and to working with ASIC, the Government, industry, consumer groups and all stakeholders to promote consumer protection outcomes and a competitive Australian FinTech industry.”

More reading

• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• 2 fast-growing ASX tech shares to buy
• 5 things to watch on the ASX 200 next week
• Why are ASX tech shares all over the place today?
• Why the Aristocrat (ASX:ALL) share price could jump next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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The Commonwealth Bank of Australia (ASX: CBA) share price lifted almost 3% last Wednesday following its resilient first quarter FY21 results.

First quarter results recap 

Considering the response from brokers, CBA delivered a fair result. Its home loan growth grew twice as much as the wider banking system, benefiting from higher application volumes and a continued focus on credit decision turnaround times. The domestic business lending growth was also above system, with solid growth across diversified sectors. Its strong operational performance helped offset ongoing margin pressures due to lower interest rates. Its unaudited cash net profit after tax was $1.8 billion for the quarter, down 16% on the prior corresponding period. 

The bank’s CET1 ratio was 12.1% as at 30 September, significantly above APRA’s ‘unquestionably strong’ benchmark of 10.5% and well in excess of the prudential minimum of 8%. This compares to the rest of the big four banks which currently maintain CET1 ratios between 11.13%–11.47%. 

What do the economic indicators suggest?

Economic indicators relevant for businesses, consumers and property suggest that the worst is behind us.

Australia’s November consumer confidence hit seven-year highs as consumers are more optimistic about the economy with the coronavirus pandemic now largely under control. The Westpac-Melbourne Institute index of consumer sentiment was tracking at 107.7 in November, 11% higher than its level a year ago. 

Similarly, in October, the Roy Morgan Business Confidence index jumped 13.1 points or 15.3% to 98.7, the highest monthly reading for more than 8 months since February 2020. The recovery in business confidence in October means the index has performed an unprecedented near-perfect ‘W’ pattern over the last 9 months. 

Auction clearance rates have been consistently strong around Australia, perhaps reflective of the recent strength in the REA Group Limited (ASX: REA) share price. This has been supported of course by the RBA’s recent interest rate cut and the ‘guarantee’ of rates remaining low for at least 3 years. 

Bank loan deferrals have been consistently falling. In the case of CBA, as at 31 October, approximately 46,000 home loans remained in deferral down from 125,000 loans in June 2020. 

Broker moves 

Macquarie raised its CBA share price target from $58.50 to $65.00 and retained its underperform rating. It likes the bank’s balance sheet strength, improvement in deferrals but risks remain with respect to lower margins. 

Similarly, Jefferies raised its CBA share price target from $52.85 to $75.50. It reacted positively to the bank’s quarterly trading update and upgrades its rating from underperform to hold.

More reading

• ASX 200 Weekly Wrap: ASX continues to hit post-COVID highs
• These ASX dividend shares offer yields 8 times greater than term deposits
• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• After 8 months, ASX 200 shares are finally out of correction territory

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. 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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The shares for a $278 million fashion retailer commence trading on the ASX this week.

Universal Store Holdings Limited (ASX: UNI) has raised $147.8 million through its initial public offering (IPO) and its shares will be available midday Monday AEST on a conditional basis.

Any transactions on Monday and Tuesday are expected to be settled on Wednesday morning before the ASX opens. Shares will then be open to normal trading from the start of market on Wednesday.

The IPO price per share was $3.80, which equates to a market capitalisation of $278.1 million.

The ASX listing is the brainchild of billionaire, Brett Blundy, who has previously listed retailers Adairs Ltd (ASX: ADH) and Lovisa Holdings Ltd (ASX: LOV), as well as commercial property company Aventus Group (ASX: AVN).

Blundy’s company acquired Universal two years ago for $110 million from its founders.

The youth fashion seller then went against the rest of the industry by posting strong revenue growth in recent years. The last seven weeks has seen a 33% increase in Universal’s year-on-year sales.

“Today is a milestone in the growth of Universal Store,” said Universal Store chief executive, Alice Barbery.

“Our culture and care for our customers is at the heart of all that we do and is critical to our continued success.”

Physical stores roaring back

Universal has 65 stores nationally, but had 12 Melbourne outlets closed during that city’s second lockdown.

Those stores have now been reopened for two weeks, posting sales growth of 23% year-on-year during that period.

“We are delighted to have all our Victorian stores open and trading again in the lead up to school holidays and the Christmas season,” Barbery said.

“We are also encouraged by the prospects for our stores and online sales in Melbourne as restrictions are further eased over coming weeks.”

Although Universal has an online store, the majority of its revenue comes from physical outlets. This could point to an upside in the next 18 months as solutions potentially come along for COVID-19.

The ASX has welcomed two other high-profile retailers to its boards over the last month.

Adore Beauty Group Ltd (ASX: ABY) came in with a market cap of $635 million but is currently down on its IPO share price of $6.75, sitting at $6.

Mydeal.ComAu Pty Ltd (ASX: MYD) has fared much better, pushing its IPO share price of $1 up to $1.25.

More reading

• Suncorp (ASX:SUN) share price higher after trading update
• Why the BWX (ASX:BWX) share price is charging higher today
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Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO and AVENTUS RE UNIT. 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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The Suncorp Group Ltd (ASX: SUN) share price is pushing higher following the release of a trading update.

At the time of writing, the insurance and banking giant’s shares are up 1% to $9.26.

What was in the Suncorp update?

This morning Suncorp provided an update on the expected impacts of COVID-19 on its General Insurance and Banking businesses and the APRA September quarter General Insurance statistics.

In respect to COVID-19, the impact on Suncorp’s General Insurance portfolio for the first half of FY 2021 is expected to be broadly neutral. Management notes that potential business interruption (BI) claims and premium waivers have been largely offset by reductions in motor claims.

In respect to its BI claims, management remains confident the intention of its BI policies is clear and that policies do not respond to pandemics.

Nevertheless, due to its prudent approach to provisioning, the company’s BI provisioning is sufficient to cover claims costs in 90% of possible outcomes. This includes in the event of an unfavourable judgement for the Insurance Council of Australia BI industry test case.

Taking into account the breadth and depth of the second Victorian lockdown, the company now expects to recognise a further $125 million (pre-tax) provision for potential BI claims. This will take its total provision for potential BI claims in relation to COVID-19 to $195 million (pre-tax).

Suncorp Bank.

Moving to its banking business. Management advised that Suncorp Bank’s credit quality remains strong, with total impairment losses of $3 million for the September quarter.

At the end of September, Suncorp Bank had $3 billion of loans under temporary loan deferral arrangements. This represents 4% of its housing portfolio and 7.6% of its SME portfolio.

APRA September 2020 Quarterly General Insurance Statistics.

The company notes that on 26 November, the Australian Prudential Regulation Authority (APRA) will publish institution-level financial statistics for the general insurance industry. This is based on regulatory filings for the quarter ended September 2020 and includes statistics for its AAI business.

Management has highlighted that the APRA statistics do not include the impact to the profit and loss statement of several key adjustments, particularly the valuation of its long tail insurance portfolio which is conducted on a half yearly basis and included in Suncorp’s regular financial disclosures.

Included within the regulatory filing are the results of AAI’s Liability Adequacy Test (LAT) for the September quarter. The LAT is undertaken to test whether unearned premium liabilities on the balance sheet are sufficient to cover the cost of expected future claims.

The company advised that there is significant seasonality in its LAT calculation, with premiums earned on a straight-line basis, while future claims reflect the seasonality of natural hazards. Furthermore, the September quarter is typically the weakest LAT outcome, with the company exposed to the upcoming summer season.

In light of this, a deficit of $173 million will be revealed, but this is expected to have substantially unwound by 31 December 2020, and to be profit neutral for FY 2021. In other words, investors need not panic over AAI’s weak numbers in APRA’s update.

More reading

• Can the Suncorp (ASX:SUN) share price go higher from here?
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• The Suncorp (ASX:SUN) share price is slightly lower on day of AGM
• Invest your Suncorp dividends in these ASX shares today

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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The BWX Ltd (ASX: BWX) share price is charging higher on Monday.

In morning trade the personal care products company’s shares are up over 4% to $4.22.

What did BWX announce?

This morning BWX announced a strategic partnership with British ecommerce company THG Holdings.

According to the release, THG will provide a full-service solution, including localised digital capabilities for taking BWX brands direct to consumers across Europe and Asia.

THG Ingenuity, the technology services division of Manchester Airport-based THG Holdings, is a global proprietary technology platform. It specialises in taking brands direct to consumers.

Management notes that the agreement will provide BWX with an end-to-end e-commerce solution and access to THG’s digital platform and full-service supply chain to build more meaningful scale for the company’s brand portfolio across Europe and Asia.

What now?

BWX has advised that the collaboration will initially target five priority markets. After which, it is aiming to increase this to 14 markets by FY 2022.

Management expects this to play a key role in the company achieving its targeted revenues of between A$30 million and A$50 million from the European region by the end of FY 2023.

Also part of its strategy in the region is expanding the Sukin brand across all priority sales channels. This includes Supermarkets and Hypermarkets, European Drugstores, and E-Retailers. The Andalou Naturals brand is then expected to follow in FY 2022.

It is also aiming to drive brand activity via direct-to-consumer channels and re-position the Sukin brand for the European market. The latter includes maximising its Australian provenance and the A-Beauty trend across Europe.

BWX’s Chief Operating Officer, Rory Gration, believes the partnership with THG is an important step for bringing its product innovation to more consumers at a time when the Natural beauty category is thriving.

He commented: “We are delighted to announce our partnership with THG, as we leverage the already-strong consumer connection to our brands Sukin and Andalou Naturals in the UK market over recent years.”

“Combining BWX’s house of Natural brands and insights with THG’s digital brand services, cross-border expertise and sophisticated technology means we can build more meaningful brand footprints in what is a fast-evolving retail environment,” Mr Gration concluded.

More reading

• 3 ASX shares you’ll regret not buying during this correction
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• Is it time to go all in on ASX shares?
• Where I’d invest $10,000 in ASX shares for growth

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited. 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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The Althea Group Holdings Ltd (ASX: AGH) share price will be on watch today after the company announced the signing of two new agreements expected to uplift revenue. At the close of trading last week, the Althea share price was asking 44 cents.

So, let’s take a look at what Althea does and what it announced.

What does Althea do?

Althea is an Australian licensed producer, supplier and exporter of pharmaceutical grade, medicinal cannabis. The company offers a range of products, education, and other services to support patients in undertaking medicinal cannabis treatment.

What were the agreements?

According to the release, Althea subsidiary, Peak, advised it has entered into a licencing agreement with Canadian-based, Earth Kisses Sky.

The contract will involve the manufacture of two topical products, with an order of 150,000 units split evenly between the two. Production is expected to commence immediately with all units expected to be purchased in the first year of the agreement.

In addition, Peak also signed a manufacturing and distribution services agreement with Canadian cannabis beverage company, Electric Brands Inc. The new deal involves two canned beverage SKU’s with an initial order of 50,000 units.

Electric Brands Inc. was founded by executives from Canopy Growth Corp and Coca-Cola Co (NYSE: KO), Canada. The beverage company aims to develop global cannabis infused drinks for the Canadian cannabis market.

In total, Peak revealed it has projected revenue of up to CAD$4.65 million over the next 12 months. The uplift in revenue over original estimates comes as the company maintains a strong sales pipeline heading into 2021.

Furthermore, Peak’s standard processing licence obtained from Health Canada in mid-September is also projected to support greater sales.

What did the CEO say?

Althea CEO, Mr Joshua Fegan, commented on the Peak update. He said:

Since Peak received its Standard Processing Licence from Health Canada a couple of months ago, we have been busy ramping up commercial operations at the facility, and are in the process of expediting the product launch dates for both new and existing customers.

Peak has received an influx of enquiries for its industry leading Cannabis 2.0 product development, manufacturing, and distribution services, and has already signed contracts representing forecasted revenue of up to CAD$4.65m over the next 12 months.

Peak remains uniquely positioned to cater for the big consumer brands seeking to enter the recreational cannabis market and I look forward to updating the market on further agreements shortly.

About the Althea share price

The Althea share price is higher since the beginning of the year, up 12.8%. However, from mid-September, after updating the market with its standard processing licence news, the Althea share price has fallen over 30%.

More reading

• ASX stock of the day: Elixinol Global (ASX:EXL) shares blaze new highs
• Here’s why ASX cannabis shares are falling today
• How did ASX cannabis shares perform last quarter? 

Motley Fool contributor Aaron Teboneras 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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