Earlier this month, we published the first article in a series that highlights cannabis companies that are well positioned for growth in 2020.
In the first article, we covered a Canadian cannabis producer that is trading at a considerable discount to its peers. Today, we have shifted our focus to the US cannabis market and want to highlight a company that has been highly focused on this opportunity.
The company, 1933 Industries (TGIF.CN) (TGIFF) represents a multi-faceted growth story that is levered to some of the world’s most attractive cannabis markets. During the last year, the company has been in the middle of a major transition that is centered around entering new markets and increasing production capacity. 1933 Industries has been nothing short of an execution story and has been able to advance these two important initiatives while reducing capital expenditures and strengthening its balance sheet.
2020 Should be a Breakout Year for 1933 Industries
In 2020, we expect to see 1933 Industries report stronger revenues and expect numbers to incrementally improve in the back half of the year. The company has been transitioning into a facility in Las Vegas that is 5x larger than the initial facility and we expect production capacity to increase throughout the year. We are bullish on the amount of revenue that can be generated from the new facility and believe that the market does not fully appreciate the growth prospects associated with it.
Another reason we expect 2020 to be a breakthrough year for the business is due to the focus on the California market. A few months ago, 1933 Industries entered into a management services agreement with Green Spectrum Trading, a California licensed cannabis cultivator, manufacturer and distributor, that holds a pending home delivery business license. We are favorable on the expertise that each company brings to the relationship and believe that Green Spectrum represents a strategic partner for the business.
We are of the opinion that the market does not associate much value from this relationship to the company’s 2020 expected numbers and believe that the market is missing out on something substantial. In the near future, 1933 Industries expects its California based manufacturing facility to become operational and we expect this to be a catalyst for the entire business.
From a geographic standpoint, the expansion into California makes a lot of sense. From a proximity standpoint, the company is well positioned and will not be spreading itself too thin when it comes to the management of these facilities. In 2020, we expect 1933 Industries to start to generate revenue in California and this should prove to be a major catalyst for the business. Once the company starts to generate revenue in California, we expect to see a re-rating from leading broker-dealers, and this is a trend to be aware of. According to Statista, the California cannabis industry is projected to generate more than $6.59 billion in sales by 2025 and we are excited about the leverage that the company will have to this market.
1933 Industries has an attractive operating structure and has been capitalizing on the cannabidiol (CBD) opportunity through Infused MFG., and the tetrahydrocannabinol (THC) opportunity through Alternative Medicine Association (AMA). We are bullish on the structure of the business due to the awareness that will be created through the sale of CBD products. This will make it easier for the company to transition to the sale of THC products once cannabis is legalized in these markets.
We believe that 1933 Industries provides investors with a unique opportunity. Without having to spend $10+ million, the company is able to create a footprint in burgeoning cannabis markets and we are favorable on the brands that fall under the 1933 Industries umbrella. The company has been highly focused on acquiring strategic cannabis brands and we are favorable on the way these products have been able to gain traction.
A US Growth Story that is Trading at a Discount
When we analyze 1933 Industries, we see an opportunity that has several substantial revenue streams, significant potential catalysts for growth, and leverage to some of the most exciting verticals within the cannabis industry. Going forward, we expect to see the business report strong growth in the second half of 2020 and find the risk-reward profile to be attractive.
A few weeks ago, 1933 Industries reported fourth quarter financial results that showed continued growth, and this is an opportunity that seems to be under-appreciated by the street. At current levels, the company has a market cap of approx. $65 million (CAD) level, and we believe that the operation is trading at a substantial discount to its peers. As of September 30th, 1933 Industries reported to have almost $18 million of cash on hand and $22.5 million of working capital. When compared to the same period last year, the company has been able to significantly improve the strength of its balance sheet and we find this to be significant.
At a time where companies are running low on cash, 1933 Industries has been executing on all cylinders while controlling expenses. We are favorable on the approach the management team has taken when it comes to managing cash flow and expect this to play an important role in the company’s ability to operate profitably.
To learn more about 1933 Industries, please reach out to email@example.com to be added to our distribution list.
Pursuant to an agreement between StoneBridge Partners LLC and 1933 Industries we have been hired for a period of 180 days beginning July 15, 2019 and ending January 15, 2020 to publicly disseminate information about (TGIF) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month for a period of 6 months. We own zero shares of (TGIF), which we purchased in the open market. We plan to sell the “ZERO” shares of (TGIF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (TGIF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.