With the successful passing recreational cannabis legislation in Illinois, there are now 11 states with a legal recreational cannabis market, and this is a trend that has been gaining considerable traction.
During the last year, we have noticed a trend where companies are expanding across the US and are entering these new recreational markets as well as burgeoning medical cannabis markets. This is a trend that we find to be quite exciting as these companies are quickly scaling their respective businesses and are entering new markets.
Over the next year, we expect to see cannabis companies continue to expand across the US and expect these expansions to play a major role in the continued growth of these businesses. Today, we have highlighted 3 US cannabis businesses that are highly focused on expanding across the US and believe that these are opportunities to be watching.
Green Thumb Industries: An Expansion Story to be Watching
Green Thumb Industries Inc. (GTII.CN) (GTBIF) is highly levered to the cannabis retail opportunity in the US and has been nothing short of an execution story. Last week, the US cannabis retailer announced plans to open its 25th dispensary in the nation and we are favorable on the markets that the company has been focused on.
The most recent dispensary opening was in Pennsylvania and this was Green Thumb’s sixth location in the state. In 2017, the company entered the Pennsylvania market, and this is an opportunity that we are excited about. So far, the recent numbers coming out of the state are impressive and we expect this market to be a major growth driver over the long-term.
Another medical cannabis market that we are excited about is Florida and Green Thumb has been highly focused on this burgeoning opportunity. During the last year, the company has significantly advanced its operations in Florida and we are bullish on this aspect of the story. Florida is expected to be one of the largest medical cannabis markets in US and we expect to see this market transition into a recreational state in the coming years.
When looking at the Green Thumb opportunity, one of the most attractive aspects of the story is related to the strength of the management team. Green Thumb CEO Ben Kovler is the heir to the Jim Beam liquor empire and has been able to attract strategic investors like hedge fund billionaire Leon Cooperman. We are favorable on this aspect of the story and are impressed with the way that Kovler has advanced the business.
When it comes to attractive US growth opportunities, Green Thumb is one of the first companies to come mind. We believe that the US cannabis retailer has significant growth prospects and will continue to monitor this opportunity. Over the next year, we expect to see Green Thumb record strong revenue growth and believe that this is a company to be watching.
Plus Products: In the Early Innings of a Major Expansion
Earlier this year, Select, a leading US cannabis concentrate company, was acquired for almost $1 billion and this was a development that caught our attention. This acquisition was all the proof that we needed to show that the interest in cannabis brands is reaching an inflection point and Plus Products (PLUS.CN) (PLPRF) is a burgeoning cannabis brand that we are excited about.
Plus Products is highly levered to the cannabis edibles market and has been primarily focused on the California market. The company has been nothing short of an execution story and is the top selling edible in the California market (according to BDS Analytics). This is a major accomplishment and we are impressed with the company’s ability to be successful in one of the most competitive cannabis markets.
In late May, Plus Products announced plans to expand into the Nevada market through a definitive agreement to partner with TapRoot Holdings, a vertically integrated cannabis company with cultivation and manufacturing facilities in Las Vegas. When it comes to selection a strategic partner, Plus Products conducts significant due diligence and believes that it can leverage TapRoot’s extraction capabilities as a part of a supply agreement. In addition to TapRoot’s extraction capabilities, it has also received 7 of the 61 newly issued retail licenses in late 2018.
Plus Products believes that TapRoot has the facilities available for the company to easily and quickly deploy its machinery, ingredients, and personnel to ensure that the product remains consistent both in California and Nevada. As the company expands into new markets, it will serve as the manufacturing operations partner to ensure quality and consistency across markets. We find this to be significant when it comes to creating a consistent product and are bullish on the growth prospects associated with this relationship.
On an annual basis, Las Vegas attracts more than 42 million tourists, and this has made Nevada one of the most significant cannabis markets. When a company is working to build a national (or global) brand, they need to be focused on several key markets. These markets are similar in the way that they attract tourists and bring the people to the brand. We are favorable on the leverage that Plus Products will have to Las Vegas and believe that it is a key market to building an internationally recognized brand.
We believe that Nevada is just the start of something much bigger for Plus Products and this is an opportunity that we are excited about. One of the reasons we are favorable on Plus Products is due to the type of investors that it has attracted. The company has received large investments from some of the most significant hedge funds that are focused on the cannabis industry and this is a testament to the quality of the opportunity. Plus Products is a company that has massive growth prospects and is an opportunity we continue to watch.
Chemesis International: Highly Focused Coast to Coast Expansion
Earlier this month, we highlighted Chemesis International Inc. (CSE: CSI) (OTC: CADMF) which is in the early innings of a massive expansion and is an opportunity that we are excited about. The company recently started to focus on the cannabis opportunity in the central US and has expanded out of California.
We are favorable on this focus and believe that the central US market is much less saturated than the opportunity on the east or west coast. Chemesis has initially planted its flag in Michigan and has received hemp cultivation and processing licenses for this market. Over the next year, we expect to see the company expand into additional markets in the central US and are favorable with the decision to start in Michigan.
Following the granting of the Michigan hemp licenses, Chemesis received approval to construct a state-of-the-art processing facility and this is an initiative that we are excited about. According to New Frontier Data, Michigan is expected to be a $755.7 million market by 2020 and represents a major opportunity for Chemesis.
While are excited about the opportunity in Michigan, the most attractive aspect of the Chemesis story is related to the focus on the California market. This is the world’s largest cannabis market and Chemesis has been laser focused on this burgeoning opportunity. Another attractive aspect of the story is related to the focus on the cannabis concentrate opportunity and we expect this to be a major growth driver for the entire business. By 2022, the cannabis concentrate market is expected to be generating approx. $8 billion in retail sales and this is an opportunity that we continue to monitor.
During the last year, Chemesis has been nothing short of an execution story and has itself well positioned to capitalize on some of the most attractive verticals of the cannabis industry. We believe that the granting of the Michigan licenses represents further progression in Chemesis’ long term goals of being a leading multi-state operator and find this to be significant. We are favorable on the growth prospects associated with this strategy and will monitor how the team continues to advance operations.
Chemesis is led by a management team that has a proven track record of success and we are favorable on the way the company is positioned for growth. The management team has also been highly focused on the international opportunity and Chemesis recently expanded into Colombia. This is an exciting aspect of the business and we believe that the company has several major potential catalysts for growth.
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