Echelon Wealth Partners published a report on the cannabis market Friday that should be required reading for anyone interested in investing in the space. Over 34 pages, it lays out the entire weed scene in Canada, and much of the US, breaking down the metrics behind all of the public company LPs and associated service providers.
Of special note, to me, was that Echelon sees Emblem Cannabis as a speculative BUY to $5.25, which is ballsy in a market that many see as having inflated market caps. Echelon likes what Emblem brings, that it has a sizable war chest, and sees a strong upward trend for the industry proper. We like Emlbme a bunch – hit the link above for more detail.
On the rest of the document, there’s oodles of strong information on companies like Canopy Growth Corp (CGC.T), Aphria (APH.V), Mettrum (MT.V), Aurora (ACB.V) and the ailing Organigram (OGI.V), while smaller and newer players such as Cannimed (CMED.T), Canabo Medical (CMM.C) and Emerald Health (EMH.V) get sidewards glances.
Some points of note to me:
- TOP DOLLARS :Emblem has in-the-money warrants and options that would, if fully converted, would bring in an extra $36.5 million to the company’s already heaving treasury.
- GREASING THE WHEELS: Former Canadian weed monopoly Cannimed has around 70% of the market share in oils
- DON’T MENTION THE WAR: Peace Naturals (part of Cronos Group – MNN.V) is exporting cannabis to Germany under its arrangement to supply a German pharma company
- MULTI REVENUE STREAMS: Canabo Medical is drawing 2/3 of its revenue ($1.3m as of mid 2016, much higher now) from patient visits, and the remainder from data and research revenue. Aphria bought a 17% stake at $1.40 p/share, for a company currently trading way oversold at $0.74.
- THE CLINIC WAR: Aurora’s CanvasRX patient counseling clinic network has 19 locations in Ontario and Alberta and some 13,000 patients, and earns revenue from LP’s by referring patients to said LPs, while supplying Aurora with aggregate patient data. Canabo Medical, with Aphria as a stakeholder, has 12 locations at last count (with plans for more opening soon), spread across the country. Canabo has some 15,000 patients at last count, doesn’t rely on patient referral commissions at all (which the medical community frown on), and is actively selling its data to researchers, pharma companies, and LPs. In Q3, CanvasRX earned $700k in revenue, which is close to Canabo’s numbers. If CanvasRX hits all its milestones, Aurora will have paid $37 million for it. Canabo currently has a $25 million market cap. Canopy Growth Corp has its own patient outreach clinics in the former MedCanAccess chain (now Tweed Main Street), which has four Ontario locations, but will also benefit from Mettrum’s association with the 17-location Bodystream network when that company becomes one with the Canopy. Emblem’s 10-outlet GrowWise arm currently boasts 700 patients.
- CRANK IT OUT: According to Echelon, the current max capacity of each LP is as follows: 14.k kgs for Canopy, 7k for CanniMed, 5.6k for Mettrum, 5.5k for Aurora, 3.6k for Aphria, 2.6k for Cronos, 1.5k for Organigram, with Emblem at 2.1k when their fully funded phase II plan kicks off shortly. Supreme’s Phase II expansion, which is bought and paid for, takes it to 10k production by June. Emerald Health’s production is negligible, having earned $50k in sales during Q3 2016.
- FAT FINANCINGS: The most recent financing at each of the top 5 producers brought in a total of $218.3 million, with Supreme’s recent financing jacking that up to well north of $250 million, and Emblem kicking that over the top by a considerable margin. There’s clearly a lot of money left in the financing space, which is evidenced by groups such as Telus and AltaCorp joining in recent financing rounds. CannaRoyalty’s 1-hour $15 million financing a few weeks back adds weight to the evidence, as do earlier financing rounds for companies like Invictus MD Strategies, as they pick up acquisition targets.
- Not mentioned in this report, but on the tip of everyone’s lips right now is the weed debut to end all weed debuts, The Green Organic Dutchman (TGOD), which is opening its financing in a few weeks, as I understand it, and involves just about every broker, dealmaker, financier, big investor and stock promoter in Canada. This is going to be a big deal, very quickly. More info as it comes to hand.
Read the whole thing at the link below.
[pdf-embedder url=”https://edwf2rfws4u.exactdn.com/wp-content/uploads/2017/02/Cannabis_Theme_Report.pdf” title=”cannabis_theme_report”]
As always, come back often for more info on the cannabis scene, which Equity.Guru has been a leader in since we began.
— Chris Parry
FULL DISCLOSURE: Equity.Guru marketing clients in the cannabis space include Canabo Medical, Emblem Cannabis, Invictus MD Strategies, Marapharm, Golden Leaf Holdings, Finore Mining/Kushtown USA, Vinergy Resources/MJ Biopharma, Tinley Beverage, Veritas Pharmaceutical, ABCann, Calyx Bio-Ventures, and Liberty Leaf. Equity.Guru holds stock in CannaRoyalty, Golden Leaf, Vinergy, Tinley, Invictus, Calyx, and Finore.