Marijuana Stocks Global Distribution Edition
With recreational marijuana set to be legalized in less than 2 months, we finally believe we’ve seen the bottom in the cannabis sector, and we are currently experiencing the joys of an uptrend. The $5 billion CAD investment in Canopy Growth Corp (TSX: WEED) from Constellation Brands, Inc (NYSE: STZ) followed by the Ontario Cannabis Store announcing supply agreements, were the catalysts needed to bring the spotlight back to the sector and getting new investor confidence. Tilray (NASDAQ: TLRY), Canopy Corp (TSX: WEED), Cronos Group Inc (TSX: CRON) are all experiencing the advantage of being listed on both the Toronto Stock Exchange and the Nasdaq, seeing more than 40% gains this month, and Tilray leading the trio with over 75% increase in share price (August month to date). As the momentum continues, we will take a look at 4 companies that we feel have more long-term value, and should be ones to keep on your watchlist (For a complete list of MJ Stocks Click Here).
LARGEST GLOBAL DISTRIBUTION CHANNEL
As one of the few Canadian cannabis companies with a market cap worth over a billion dollars, Aurora Cannabis Inc (TSX: ACB) (OTCQB: ACBFF) (Frankfurt: 21P; WKN: A1C4WM) is shaping to be one of the top industry leaders. Boasting over 11 production facilities (9 in Canada and 2 in Denmark), with a total footprint of 4.5m sq. ft, and a potential production capacity to grow 570,000kg of premium cannabis per year, one would think that would be enough to justify its market capitalization. According to management and long-term shareholders, Aurora’s global distribution channel is what differentiates them from the rest of the sector, and is a key component that some fail to see.
Source (Aurora Investor Presentation)
This massive distribution network spans 5 continents in key highly populated countries. Through joint ventures, acquisitions and supply agreements, Aurora’s unique distribution channel will give them peace of mind to concentrate on the production of dried cannabis and CBD oils, without having to worry about demand, therefore significantly increasing future revenue and shareholder value. Lastly, Aurora has invested in and established strategic partnerships with a wide range of leading innovators, including: The Green Organic Dutchman Holdings Ltd. (TSX: TGOD), Radient Technologies Inc. (TSXV: RTI), Hempco Food and Fiber Inc. (TSXV: HEMP), Cann Group Ltd. (ASX: CAN), Micron Waste Technologies Inc. (CSE: MWM), Choom Holdings Inc. (CSE: CHOO), Namaste Technologies Inc. (TSXV: N), Evio Beauty Group (private), Wagner Dimas (private), Capcium Inc. (private), CTT Pharmaceuticals (OTCC: CTTH), and Alcanna Inc. (TSX: CLIQ). As the sector ages, the value of these acquisitions and partnerships will increase providing Aurora with greater cash flow.
The Evolution of the “Your Everything Cannabis Store”
Namaste Technologies Inc (TSXV: N) (FRA: M5BQ) (OTCMKTS: NXTTF) with an increase in share price today of 0.26 cents and it being one of Aurora’s partners, it only makes sense that we explore the world of the global e-commerce giant. Currently bringing in a comfortable $4-5m dollars worth of revenue per quarter (compare to the rest of the sector here), from selling everything cannabis related (unfortunately no dried cannabis and CBD oils as of yet) on 24 websites in 20 different countries, Namaste could have stopped there, but it definitely has not.
Source (Namaste Investor Presentation)
Namaste clearly understands that there is a bigger picture than just concentrating on vape products, which will increase customer satisfaction and investor value. With their one of a kind business model and over 25 partnerships and supply agreements (some of which are industry leaders Aurora, Aphria, Ample Organics for example) once Namaste receives their license to sell, they will see a significant increase in revenue. CannMart is definitely one their current focuses, Namaste recently announced more supply agreements this week, and with Health Canada’s inspection at the end of July, we hope in the near future we will see them receive their license.
In recent weeks we have seen an increase in advertising of NamasteMD. NamasteMD is definitely a true asset for Namaste and its investors. With the recent Bonify news release this week giving them an additional 14k patients and the IcMD deal to provide patient consultations to over 1.5 Million indigenous community members, every patient acquired will potentially bring in recurring yearly revenue.
Lastly, with legalization fast approaching, Namaste technologies will bring in additional revenue and customer satisfaction from pineapple Expresses same day delivery. Uppy’s database and Namaste A.I will also be licensed to new or experienced companies showing that Namaste has definitely been working hard for the past couple years to make sure they don’t miss any opportunities to create partnerships, increase revenue streams, and satisfy customers.
California Consolidator with one of the Largest Distribution Network
High Hampton Holdings (CSE: HC) (OCT: HHPHF) (FRA: 0HCN), when the Canadian marijuana sector will start to heat up, we will likely start seeing some winners and losers, and some companies not meeting key milestone timeframes and revenue expectation. To avoid bag holders, besides doing due diligence, one needs to have diversification in their portfolio. High Hampton is a publicly traded Canadian company whose main focus is consolidating California (for a complete overview view here). With a population of 39m people and over 160m tourists visiting per year, with recreational and medical cannabis legal, California will be an attractive and one of the largest cannabis markets. High Hampton with its recent acquisitions currently has the biggest distribution network in California, from any Canadian publicly traded company. Top line revenue is expected shortly and with new regulations being implemented in Jan 2019, expect High Hampton to acquire new brands to add to their distribution network. Lastly, Coachella Gro which is High Hampton’s 257k sq. ft facility, construction is expected to be finished mid-2019, with a potential to grow 50k pounds of cannabis per year, will significantly increase revenue.
Source (High Hampton Holdings Website)
Micro Cap Vertically Integrated Producer
Canada House Wellness Group (CSE: CHV) (OTCMKTS: SARSF) (FRA: 509A), currently has 11 cannabis clinics and a license to produce cannabis for their 22,000 sq. ft facility in Pickering, Ontario. They will not be a global player but with partnerships, they are poised to be vertically integrated in Canada. With current revenue of $789,868 as per their quarter ending Jan 31st, 2018 and a share price of approximately 20 cents, we feel catalyst in the near future may increase shareholder value (for a complete overview view here). Canada House, who recently received their license to sell pot seeds (as per the acmpr website), is currently focused on the acquisition of new patients and helping all Canadians have access to medical cannabis. With cultivation well underway, a license to sell is on the horizon and with fellow micro-cap producer Eve (TSXV: EVE) share price increasing of 65% month to date it’s only a matter of time until Canada House follows.
The cannabis sector is expanding at an incredible pace and at times may be hard to keep track of all the current companies. As legalization, fast approaches expect more articles and hopefully soon interviews, that will assist you in your journey in investing in the cannabis sector. Don’t forget to look at the resource section on our website and to follow us on Facebook, Twitter, and Instagram.
Disclaimer: this article is for informational purposes only, we are not brokers or financial advisors, this is not for “buy” or “sell” purposes. We do have shares of ACB, Namaste, HC, CHV and many others seeing how we’ve invested in the sector for over 3 years. We are long and do not plan to sell them within the next couple of day from this article. Full disclaimer