California represents one of the most attractive cannabis markets in the US and is currently the largest cannabis market in the world. According to Arcview Market Research, California’s legal cannabis market is on track to generate $3.1 billion of revenue in 2019. The firm expects California to be a $7.2 billion cannabis market by 2024 and this represents an exciting opportunity for the companies that are levered to this market.
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Although the California cannabis market is expected to report strong growth on a year-over-year basis, most of the companies that are levered to this opportunity have been trending lower with the rest of the cannabis sector over the last few months. Going forward, we expect to see these companies report strong growth and want to highlight 3 businesses that are highly levered to this burgeoning market.
Next Green Wave: A Turnaround Story in the Making
Next Green Wave Holdings Inc. (NGW.CN) (NXGWF) is a vertically integrated premium medical and recreational cannabis company in California that is in the middle of a transition that is focused on generating significant revenues. The company operates a state-of-the-art 35,000 sq. ft. indoor facility and is in the process of modyifying the research and innovation facility which will host the extraction operation as well as facilitate the cloning process.
When looking at the Next Green Wave opportunity, one of the initiatives that we are most excited about are related to the plans to significantly increase production capacity.
Over the next year, the company plans to expand the size of its facilities to 350,000 sq. ft. and we are bullish on the growth prospects associated with this initiative.
During the last year, there has been a significant increase in the number of companies that are focused on the California market. Due to this, we are focused on businesses that represent differentiated opportunities, have strong balance sheets, and have visible growth prospects. Next Green Wave possesses these traits and this makes us more confident when analyzing the company’s long-term opportunity.
One of the ways that Next Green Wave has been able to differentiate itself is through the development of a premium seed library that has more than 120 strains and includes several award-winning genetics and cultivars. Through this seed library, the company will be able to offer a diverse product line to consumers in California and we are favorable on this aspect of the story.
Another way that Next Green Wave has been able to differentiate itself is through its focus on distribution. This represents an attractive growth vertical for the California cannabis company and we are favorable on how this focus enhances the entire business. Going forward, Next Green Wave plans to sell products through its retail and wholesale network and we will monitor how the team is able to execute on this aspect of the business.
Although Next Green Wave has significantly advanced its fundamental story so far this year, the company has been under pressure and this is a trend that we continue to monitor. Going forward, we find the company’s risk-reward profile to be attractive and believe that the business has significant potential catalysts for growth. At current levels, Next Green Wave is trading at a considerable discount to its peers and we are closely monitoring this opportunity.
Plus Products: A Expansion Story in the Making
One of the most exciting opportunities in California is the cannabis infused product market and we have been closely following the companies that are leveraging the brand building opportunities within this growing segment of the market. Plus Products (PLUS.CN) (PLPRF) is a great example of a company who’s won through its execution in the edibles segment.
In California, Plus Products sells the two most popular branded cannabis products in the state (according to BDS Analytics) and their products are available at over 300 licensed retailers. The company recently launched a new product (PLUS Mints) and these products have been gaining meaningful traction across the state. The company has a pipeline of new product innovations and we are bullish on the growth prospects associated with this.
For the last twelve months, Plus Products has had the #1 and the #2 selling branded cannabis products in California and we find this to be important as they have driven their growth without major product proliferation, indicating they have developed a core following. The company has been highly focused on increasing the number of products it offers and on entering new markets across the US, starting with Nevada, and these are two initiatives that we are excited about. We believe that Nevada is just the beginning of a major expansion for Plus Products and will be monitoring how the team is able to execute on this new market.
Based on the success that Plus Products has had in California, we expect to see the company’s premium line of products gain significant traction in Nevada and are bullish on the growth prospects associated with this. The ability to capture a leading market position in a market that is as competitive as California is a major accomplishment and we expect to see the company’s products capture market share in new markets like Nevada.
Las Vegas has become one of the most attractive cannabis markets in the world and is one of the best destinations for cannabis companies that are looking to maximize exposure. More than 42 million tourists visit Las Vegas on an annual basis, and this provides Plus Products with a cost-effective approach to reach millions of cannabis consumers. Over the next year, we expect this market to prove to be a growth driver for Plus Products and will monitor how the move into this market benefits the business.
Plus Products is led by a management team that has a proven track record of success and we are favorable on the continued execution. We believe that the management team has had its finger on the pulse of the cannabis industry and are impressed with some of the large investors that are backing the company. We believe that Plus Products has significant catalysts for growth and have put the company on our radar following the recent market decline.
1933 Industries: Expands Focus into California
A few months ago, we met with 1933 Industries (TGIF.CN) (TGIFF) while we were in Las Vegas and were impressed with how the management team has been able to advance the story so far this year. Although the management team has been laser focused on the Nevada market, the company recently announced an expansion into California and we are bullish on the growth prospects associated with this opportunity.
Last week, 1933 Industries signed a management services agreement to provide operational and accounting services, general management and oversight for two-years to Green Spectrum Trading, Inc., a medical and recreational cannabis business licensee in California. Green Spectrum is a licensed cannabis cultivator, manufacturer and distributor, and holds a pending home delivery business license.
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The agreement serves to establish a local presence for the company’s subsidiary, Alternative Medicine Association (AMA) branded products outside of Nevada, and expands the footprint of its CBD wellness line. We are favorable on the relationship due to the expertise that each company brings to the partnership and find this to be significant. California represents a multi-billion-dollar market and this is an imitative that we are closely watching.
Under the terms of the agreement, 1933 Industries will provide the services necessary for the operation of Green Spectrum’s business, including oversight over the general management of the business and operations, product manufacturing, distribution efforts, staffing, sales, marketing, accounting, and compliance. The company will utilize its expertise in manufacturing and building distribution networks to undertake all initiatives relating to the establishment of a new cannabis manufacturing and extraction facility.
1933 Industries will be taking the same vertically integrated approach that has been successful in Nevada to California and are bullish on the growth prospects associated with this. Through Green Spectrum, the company will have the advantage of working with an established cultivator to build manufacturing and expand its distribution channels for its brands in California. This provides 1933 Industries with a significant advantage and we expect this relationship to prove to be a major revenue driver.
Although 1933 Industries has reported several significant developments over the last few months, the shares have been trending lower with the market and this is an opportunity that we are excited about. From the move into a much larger facility in Las Vegas to the entry into California, this is a company that has significant catalysts for growth and we believe that the market does not fully appreciate the values associated with these initiatives.
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.
Pursuant to an agreement between StoneBridge Partners LLC and PLUS Products Inc. we have been hired for a period of 365 days beginning March 21, 2019 and ending September 21, 2019 to publicly disseminate information about (PLUS) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month (CASH) for or were paid “96,000” shares of restricted common shares. We own 156,000 shares of (PLUS), which we purchased in via private placement. We may buy or sell additional shares of (PLUS) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information. On November 1st 2018 StoneBridge Partners LLC sold 50,000 restricted shares of (PLUS) to a private investor via a direct sale.
Pursuant to an agreement between StoneBridge Partners LLC and Next Green Wave Holdings Inc. we have been hired for a period of 180 days beginning May 1, 2019 and ending November 1, 2019 to publicly disseminate information about (NGW) including on the Website and other media including Facebook and Twitter. We are being paid $7,000 per month (NGW) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero (0) shares of (NGW), which we purchased in the open market. We plan to sell the “ZERO” shares of (NGW) 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 (NGW) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.