Zoetic International
Zoetic International – CBD Hemp Stock Investing
ZOE (LSE), ZOEIF (OTC)
Zoetic International
Zoetic International (formerly Highlands Natural Resources) is a vertically integrated CBD company operating out of Colorado, USA but is also listed on the London Stock Exchange. They grow, produce hemp seeds, and CBD products sold online and in a few retail locations.
Recommendation: See Below
Fundamentals
Profile:
HQ: Perth, Scotland
Founded: 2015 (previously Highlands Natural Resources)
Facilities: Denver, Colorado, USA; Perth, UK
Symbol: ZOEIF (OTC), ZOE (LSE)
Focus: Neutral
Zoetic, a vertically integrated CBD company, is focused on diversifying its operations to retail CBD products from its natural resources business. Zoetic aims to achieve higher margins with a focus on manufacturing and retail by developing higher quality feminized hemp seeds. Zoetic is also focused on expanding its current range from CBD oils and softgels to beauty and personal care products.
Size: Weak
Market Cap: GBP 8.72 million
Enterprise Value: GPB 7.65 million
# of employees: 11
Markets: Neutral
Primary: Colorado
Secondary: USA, UK
Subsidiaries: Zoetic is a subsidiary of Highlands Natural Resources (HNR)
Operations: Neutral
Cultivation:
Current production: NA
Future production: Indoor growing facility of 33,000 square feet in DeBeque, Colorado. Fully operational in 2020. Planted hemp on 16 acres in Palisade, Colorado
Distribution:
Direct sales: Planning to sell online through zoetic.uk.com in the UK and thechillway.com in the US
Store networks: NA
Supply Agreements: Signed a distribution partnership agreement with Mr. Checkout in the US
to use the services of their 15 distributors on a trial basis.
Integration/Diversification:
Vertically integrated: Yes
Horizontally diversified: No
Financials: Neutral
Outstanding shares (diluted): 118.2 mil
Revenue last quarter: £1.1 mil
EPS: (2.86)
Management: Strong
CEO: Nick Tulloch
CFO: Trevor Taylor
Nick Tulloch, CEO of Zoetic, has over 20 years of corporate brokering and financial advisory experience in the financial sector working with investment banks and stockbrokers. Trevor Taylor, Chief Strategy Officer of Zoetic, has experience running a recreational cannabis company in the US as the Chief Executive Officer.
Branding: Strong
Zoetic is focused on promoting its brand as a specialty premium CBD brand in the US and UK by offering topicals, soft gel capsules, and tinctures. Zoetic aims to promote it’s Chill brand as a premium CBD brand specializing in alternative tobacco products in the form of vapes, smokables and chew pouches.
Valuation: Weak
Current share price: US $0.09
Price to Sales: 4.8 (Tobacco industry Avg. = 5)
52 Week Low/High: $0.07 to $0.175
EV / Revenue: 4.88
Price to Book: 2.72
Financings: Neutral
Zoetic’s parent company Highland National Resources raised £525,000 by issuing 6 million shares in 2019 to invest in operations of Zoetic. Highland National Resources further intends to divest from its natural resource business and reinvest money into its Zoetic CBD business.
Risks: High
The risks of investing in any cannabis company are currently high given the volatility of the market. The risks of investing in this company are very high given the competitiveness of the CBD market.
Zoetic International – CBD Hemp Stock Investing
Recommendation: Neutral
Zoetic, a vertically integrated CBD company, is focused on diversifying its operations to retail CBD products from its natural resources business. Zoetic aims to achieve higher margins by developing higher quality feminized hemp seeds and a line of CBD products.
Zoetic is also focused on expanding its current range of CBD oils and softgels to beauty and personal care products. Zoetic has an indoor growing facility of 33,000 square feet in DeBeque, Colorado which will be fully operational in 2020.
In 2019, Zoetic signed a distribution partnership agreement with Mr. Checkout in the US to use the services of their 15 distributors on a trial basis. They are also planning to sell their retail products online through the Zoetic website in UK and the chillway website in the US.
Zoetic will be offering topicals, soft gel capsules and tinctures under its Zoetic brand meanwhile vapes, smokables and chew pouches will be promoted under their Chill brand.
Will its stock price improve in the long term? Likely
Zoetic’s capacity to grow is good as they had cash and cash equivalents of £1.07 million during the third quarter of 2019 as compared to 1.99 million in the same period in 2018.
Zoetic reported revenue of £1.15 million for the first 6 months in 2019 of which the Natural Resources business contributed £1.12 million and the CBD business contributed only £36,000. As Zoetic intends to sell its Natural Resources (ol and gas) business, production of CBD will start coming in the first quarter of 2020 so there are chances of an increase in revenue and cash balance. This is a risk though as any delays will put them in a cash crunch.
Zoetic’s return on total asset (ROA) was -89.78 % which implies that it made a loss of $89.78 on every $100 spent on asset. This is very low as compared to the industry average however it will improve a lot as their CBD business start generating revenue.
One significant advantage is their London listing and location where they may be able to open the market with little competition and already have access to major liquidity. For these reasons, we think Zoetic, at or near its current price of $0.09 a share, can be a good investment opportunity.
Zoetic International – CBD Hemp Stock Investing
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