In this era of companies looking to buy low value/high priced assets as expensively as possible to ensure ponzi-like market cap bumps, I can appreciate when a company finds a reasonably priced asset with real world revenues and functionality, that one can see for ones self if one takes a drive down Highway 1.
I appreciate it even more when said company just cuts a cheque and gets shit done, rather than play with endless LOIs and dilutionary stock deals.
Yield Growth Corp’s (BOSS.C) subsidiary, Yield Botanicals, gave its potential yield a bump today when the parent company signed a purchase agreement with orchid/rose producer Vandenbosch Trading Company for a 10-acre property in Chilliwack BC.
Here’s what they bought:
Vandenbosch is a legit player in the local agriculture scene, with an existing orchid production business and essential oil extraction production equipment that now moves into Yield’s name. The property runs approximately 2.5 acres with 100,000 square feet of fully-equipped and automated greenhouse grow space, which would be relatively easy to shift into hemp production.
Yield boss and longtime penny play queen Penny Green sure didn’t overpay for it: The announced deal for the land, buildings, and equipment totals $2.4 million, which you’d have to think was close to the pure real estate value for the land just outside Metro Vancouver, a few blocks off the highway.
Yield paid for the deal with cash on hand. No financings. No stock blowouts.
Now, we should be clear: Yield is NOT buying an A1 Health Canada approved, licensed cannabis grow operation with pharma grade build out and Hell’s Angels-proof security. That ain’t what this is.
Here’s what it is:
That’s a garden variety (pun intended) greenhouse being used to grow products you’d buy at Safeway. And that business, as things stand, is a decent little earner.
But it ramps up a smidge when you bring hemp into it, and CBD extractions.
Here’s Rolling Stone a few months back:
For years, experts have predicted that if the cannabis industry expands at its current rate, the American market will reach $20 billion by 2020. But it turns out that one market is spinning off into a mega-industry of its own: according to a new estimate from cannabis industry analysts the Brightfield Group, the hemp-CBD market alone could hit $22 billion by 2022.
CBD, a non-psychoactive cannabinoid found in cannabis, has had a surge in popularity over the past couple of years. Unlike THC, the chemical compound that gives weed its signature effect, CBD has been shown to help with everything from PTSD and anxiety to MS and epilepsy — without getting you high.
Previously, CBD products have been available mostly in head shops, with a few doctors recommending it for various maladies. But in 2017 and 2018, the products spread to natural food stores, beauty aisles, cafés and doctors offices. So far the industry is on track to hit $591 million in 2018, and thanks to a number of factors — including, surprisingly, Senate Majority Leader Mitch McConnell — that could increase 40 times in the next four years.
Hemp and CBDs are nice, but the Yield business model doesn’t rely on the uptake of gluggy brown oils in vape pens as its reason for being. With a fast growing number of SKUs in the beauty product field under the Urban Juve brand, ownership of the farm will give the company access to other key proprietary ingredients used in its line of CBD-based health and wellness products.
Owning a farm will give Yield Growth complete control of key proprietary ingredients for its products, including hemp root oil. The purchase will also empower Yield Growth’s in-house research capabilities for growth and innovation.
As an example of the benefits of having access to a wide array of potential oil productions, here’s one of Yield’s latest product formulations, a sensual lubricant, announced last week.
Avocado oil, hemp seed and hemp root oils provide relief from dryness and chafing, while creating a nutrient-rich, healing base for Ayurvedic ingredients. Ashwagandha, known as an aphrodisiac, has been used for centuries to increase sexual desire and satisfaction for women. Black pepper oil is known to open circulation, promoting stimulation and reducing stress while providing anti-bacterial, anti-inflammatory, anti-anxiety and anti-depressive benefits. Menthol is included to cool the skin with a tingling sensation, to add further stimulation.
- 1 pound of avocado oil wholesales for $10.95
- Two ounces of liquid ashwagandha sells for $25
- Two ounces of black pepper oil costs $19.33 wholesale
- Two ounces of water soluble menthol sells wholesale for $6.62
As for hemp root oil, I couldn’t even find a wholesale price for that. If Yield can make it in-house, that’s a big plus.
Being able to squeeze your own oils is a massive cost cutting for Yield going forward, and being able to grow hemp in-house takes care of your CBD needs, which leaves the company only paying for packaging as an outside element of their supply chain.
This is a good thing.
[Yield] plans to set up an additional extraction facility dedicated to hemp root oil—a key ingredient in Urban Juve products and in the cannabis topicals line launching in Oregon. Yield Growth will also apply to cultivate industrial hemp for the purpose of hemp root oil extraction, and carry out research and development to create cannabidiol from the parts of the hemp plant exempt from the Cannabis Act.
Nobody who has the ability to run a Google search will ever be under any impression that Yield isn’t run by people who have deep experience in the realm of doing deals and promoting them heavily. Historically, this team has had much success building companies for short term acceleration, only to spin them off into the hands of others when it gets to the business of making the trains run on time.
Yield is a little different. Penny Green has her tentacles around this one and isn’t letting go. This is her baby. She sees a massive long term market, and with her penchant for wealth creation, that makes this greenhouse purchase a really interesting long term element that has me buying more stock.
— Chris Parry
FULL DISCLOSURE: Yield Growth is an Equity.Guru marketing client and the author has purchases stock in the company.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.