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Attorney General Jeff Sessions is out, and the cannabis sector traded higher on this news. His resignation is significant since he was strongly against the cannabis industry and we will monitor how the market responds today.
Sessions is being replaced by Matthew G. Whitaker who is not well known to the drug reform movement. His appointment comes the day after Michigan became the 10th state to legalize recreational cannabis and this has been a great week for the cannabis industry.
The United States cannabis industry is a burgeoning opportunity and after the Midterm Elections, there are 32 states that have legalized medical cannabis. This is significant, and we think that Federal reform is coming sooner than most expect.
Although many investors have been laser focused on the Canadian cannabis opportunity, the United States market has been gaining significant traction. Today, we have highlighted three United States cannabis companies that are poised to benefit from the trend toward legalization.
Liberty Health Sciences: A US Leader in the Making
Liberty Health Sciences (LHS.CN) (LHSIF) is one of the most attractive United States focused cannabis opportunities due to the existing operations, the growth potential, and the valuation. During the last week, the shares have been under considerable pressure and have plunged lower with the market.
This weakness comes as Liberty Health is in the middle of a major expansion and we are bullish on this opportunity. Last week, the company was awarded a Processor provisional license by the Ohio Department of Commerce and we are favorable on this development. Liberty, along with their Ohio-based joint venture partner, the Schottenstein Group, will work on securing a Certificate of Operation over the next several months. The issuance of the license follows the awarding of the Provisional dispensary license in June and Liberty owns 50.1% of both the Processor provisional license and the Provisional dispensary license.
Liberty Health has been primarily focused on the Florida medical cannabis market and is in the middle of a major expansion in the state. The company operates four dispensaries and six delivery hubs and has signed six new leases for dispensaries that are at various stages of permitting and construction. Liberty has accelerated their dispensary roll out plan and expects to open three more by the end of October. Once these dispensaries are operational, Liberty will be generating significant revenues and we are monitoring how the team executes on this.
Liberty Health is in the early innings of a major growth cycle and its Florida operations are starting to kick into high gear. In addition to the existing open locations, Liberty Health has signed leases to open Cannabis Education Centers in Boca Raton, Gainesville, Winter Haven, Palm Harbor, Merritt Island and Miami Beach. These locations will provide significant leverage to attractive markets in Florida and we are bullish on the growth prospects in these markets.
Liberty Health represents an emerging United States opportunity and we are bullish on the long-term outlook. When compared to other United States cannabis operators, the valuation is very attractive, and we think the market underappreciates the company’s growth prospects. Liberty Health is a United States leader in the making and we recommend keeping an eye on this one.
Next Green Wave: A High-Quality California Opportunity
Last month, we had the opportunity to meet with the management team behind Next Green Wave (NGW.CN) and were very impressed with this company. Next Green Wave is a fully integrated, seed-to-sale, cannabis company that is licensed for medical and recreational cannabis operations in California. The company has acquired four medical and recreational Conditional Use Permits (CUP’s) for cultivation, nursery, volatile and non-volatile extraction and distribution.
Next Green Wave is well positioned to start capitalizing on the California cannabis market in early 2019 as its first major facility becomes operational. The facility is strategically located on a 15-acre property that is between Los Angeles and San Francisco. From a distribution standpoint, this location is ideal as it allows for the company to easily distribute products across the entire state.
One of the most important aspects of the Next Green Wave story relates to the four conditional use permits (CUPs) that have been granted in California. In the state, a cannabis company is required to have a CUP for cultivation, a nursery, extraction, and distribution. These permits support the fully integrated business model and we are favorable on the growth potential in 2019 and beyond.
Next Green Wave operates a seed-to-consumer model that is primarily focused on existing and new business-to-business and business-to-consumer relationships. This is a differentiated approach and we are favorable on the company’s ability to execute on it. We are favorable on the leverage to the California market and the number of catalysts that Next Green Wave has for growth. The company is focused on the high-growth verticals of the cannabis industry and is well positioned for growth.
Although Next Green Wave is positioned to be a leader in California, the largest cannabis market in the world, the shares have been under pressure and have been trading lower with the market. We are monitoring the recent decline and believe that this is a company to be watching.
Medicine Man Technologies: Flying Under the Radar
Medicine Man Technologies (MDCL) is a United Sates cannabis branding and consulting company that has been flying under the radar and we have been closely monitoring this opportunity.
Medicine Man Technologies has been nothing short of an execution story and has been able to significantly expand its reach. The company provides guidance for 28 active clients in 12 states and recently entered the Canadian cannabis market through a relationship with Canada House Wellness (CHV.CN). During the last year, Medicine Man has entered new markets, signed new clients, and the company’s fundamentals have significantly improved.
We are favorable on the relationship with Canada House Wellness and expect this to be a major value driver for the company in 2019. Through the company’s proprietary growing process, Medicine Man is able to help Canada House Wellness produce a better product and produce more efficiently and economically. The company will be paid licensing fees for its IP and nutrients line in the form of both cash (20%) and stock (80%).
Over the next year, we expect to see Medicine Man secure additional international opportunities similar to the deal with Canada House Wellness. The company is in pre-negotiations with other groups for certain geographic consideration and would be a major catalyst for Medicine Man.
Although Medicine Man Technologies has laser focused on execution, the company has been flying under the radar and we are monitoring the shares. The company has an attractive value proposition and significant growth prospects. When you combine these traits with an elite management team, you have a company with a very attractive risk-reward profile. This is a company to watch!