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5 Cannabis Sector Leaders Making Major Headlines

Feb 11, 2019 • 11:49 AM GMT+0000
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8 MIN READ  •  By Michael Berger
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Last year, the United States cannabis industry recorded massive growth and this is a trend that is just getting started. With new market opening and existing markets growing, the opportunities for cannabis companies are significant and this is an opportunity we have been closely watching.

Today, we have highlighted 5 cannabis companies that have been capitalizing on the United States market and these are opportunities that investors should be watching. These companies have been expanding their presence in various markets in the United States and have significant growth prospects.

1933 Industries Continues to be an Execution Story

1933 Industries Inc. (TGIF.CN) (TGIFF) is a company that has significant catalysts for growth, and we have been closely monitoring this opportunity. 1933 has been laser focused on the Las Vegas cannabis market and has a planned expansion in California. During the last year, the company has recorded massive growth and fundamentals have significantly strengthened during this time. 1933 is well capitalized, is in the middle of a major expansion, and is generating significant cash flows

Last week, 1933 announced that construction on its new cultivation facility in Las Vegas is nearing completion and awaiting electrical meter installation. The new facility will house the company’s subsidiary, Alternative Medicine Association’s (AMA) indoor cannabis cultivation. AMA is one of Nevada’s largest wholesalers of cannabis products, including branded flower, wholesale distillate for vape products, and a broad range of concentrates with distribution channels in place throughout Nevada.

The purpose-built 67,750 sq. ft. cultivation facility has been developed as a two-story building on 1.39 acres and includes a sophisticated, fully automated irrigation and fertigation system (delivering precise concentrations and ratios of nutrients to each plant), a system of small vegetation/cultivation rooms for better crop management, packaging areas, supporting offices, vault, climate controlled rooms to cater to each phase of plant production, and other work areas. Once up and running, the newly constructed facility will deliver a substantial 10-fold infrastructure expansion and significantly increase AMA’s flower cultivation output.

1933 has growth prospects and has been executing flawlessly on its expansion. We have been bullish on the Las Vegas cannabis opportunity and the company has a first-mover advantage in this market. We are favorable on 1933 due to the attractive valuation, the management team, and the catalyst for growth.

Liberty Health: A Burgeoning Growth Story

During the last month, we have highlighted Liberty Health Sciences (LHS.CN) (LHSIF) several times and have continued to monitor the story. The company represents one of the most exciting growth opportunities and has been in the middle of a major expansion. Liberty Health has been capitalizing on the Florida cannabis market and has been expanding into Ohio. The company has significant catalysts for growth and is trading at a major discount when compared to its peers.

Liberty Health Sciences has been nothing short of an execution story and we are bullish on the growth prospects going forward. Currently, Liberty Health operates seven dispensaries and six delivery hubs in Florida. The company expects to open another seven dispensaries by the end of February for a total of 14 dispensaries across Florida, including locations in Miami, Boca Raton and Gainesville.

Liberty Health as well as its joint venture partner, the Schottenstein Group, have been executing on the Ohio medical marijuana market and expects to open their dispensary in Dayton, Ohio by the end of March. The companies have secured a 10,000 sq. ft. processing facility, which will be used for extraction, refining, formulation and packaging. The processing facility is expected to open in the spring of 2019 and we expect this asset to be a significant value driver for the company.

Over the next year, we expect to see Liberty Health’s fundamentals significantly improve as the company opens more dispensaries and increases production capacity in Florida. During this time, we expect the Ohio asset to start generating significant revenues and this is an opportunity that we are closely monitoring. The company has a clear line of sight for growth and expects the number of operational dispensaries to significantly increase. Liberty Health is well capitalized and well positioned to execute on its expansion plan and we are bullish on the growth prospects associated with its expansion.

Liberty Health is led by a management team that has a proven track record of success and this is an important part of the story. From a valuation standpoint, we find Liberty Health to be a very attractive opportunity and consider it to be an acquisition target for one of the massive multi-state operators. This is an opportunity that we consider to be under-appreciated and investors should be watching Liberty Health closely.

Next Green Wave: A California Cannabis Opportunity

Next Green Wave Holdings (NGW.CN) (NXGWF) is a fully licensed California cannabis company that is in the middle of a major expansion that will result in the company being one of the largest producers in this burgeoning market.  The company is focused on constructing state-of-the-art facilities for cultivation, nursery/breeding, extraction and distribution and we are monitoring how the team executes on this project.

The California cannabis market represents a massive opportunity and Next Green Wave is positioned to capitalize on this market. The company’s business is completely integrated, which allows the company to control the complete seed-to-sale process. The company is constructing two indoor facilities that have approx. 85,000 sq. ft. for cultivation and plans to increase production capacity at the facilities to 350,000 sq. ft.

Last month, Next Green Wave secured another strategic partner and entered into a licensing agreement with Intrexon Corporation (NASDAQ: XON), a leader in the engineering and industrialization of biology to improve the quality of life and health of the planet. Under the agreement, Next Green Wave will utilize Intrexon’s Botticelli next generation plant propagation platform to enable rapid production of Next Green Wave’s proprietary cannabis cultivars for the California market. This represents a significant opportunity for the company, and we will monitor how the teams execute on this.

According to the agreement, Intrexon will be entitled to royalties on Next Green Wave’s own plantlet usage and the parties will equally share the revenues from third party sales. Each company brings specific skills to this relationship and we are favorable on the growth prospects as a result of this agreement. Next Green Wave initially will deploy Intrexon’s Botticelli platform within its Coalinga facility for the California market and will be responsible for maintaining appropriate licensure at the facility. We will monitor how this process goes and will keep an eye on how this relationship adds value to the entire Next Green Wave business.

During the last year, Next Green Wave has significantly advanced its fundamental story and we are bullish on the growth prospects from here. When compared to other California cannabis operators, the shares are trading at a discount and this is an opportunity that investors should be watching.

Stem Holdings: An Emerging United States Opportunity

Last week, we highlighted Stem Holdings Inc. (STEM.CN) (STMH) as an emerging United States cannabis opportunity and wanted to follow up on this article. The company is positioned to capitalize on the cannabis markets in Oregon, Nevada, and Oklahoma. Stem is laser focused on the United States cannabis opportunity and is looking at the opportunity in Massachusetts, Florida, and California.

Stem recently reported a significant development and announced that it would be opening a cultivation facility in Nevada. The cannabis market in Las Vegas is booming and the facility is strategically located just a few miles off the Las Vegas strip. Stem Holdings is strategically positioned in Las Vegas and we expect to see the company’s family of brands gain significant traction in this burgeoning cannabis market. One of the brands, TJ’s Gardens, is an organic cannabis product line and we expect to see substantial demand for it. The focus on producing organic cannabis is significant and we expect to see these products get shelf space in Las Vegas dispensaries. We are favorable on the growth prospects associated with this asset and will monitor how the team executes from here.

When looking at cannabis companies, it is important to look at the company’s management team and this is an area where Stem Holdings excels. We met with the company in late January in Vancouver and were very impressed with CEO Adam Berk. The company is led by a management team with a proven track record of success and this is an important aspect of the story. Stem is well capitalized after recently completing a $3 million offering of special warrants and plans to use the proceeds for expansion initiatives and general corporate purposes.

During the last year, Stem has significantly advanced its fundamental story and is well-positioned for growth. The company is focused on high-growth markets and we are excited by this emerging opportunity. When compared to its peers, Stem has an attractive valuation and we think this opportunity has been flying under the radar. We will be monitoring how Stem holdings continues to capitalize on the United States cannabis market and investors should be watching this one.

iAnthus and MPX: A US Leader in the Making

One of the most exciting developments in the United States cannabis market of 2018 was the merger of iAnthus Capital Holdings, Inc. (IAN.CN) (ITHUF) and MPX Bioceutical Corporation (MPX.CN) (MPXEF). These are two leading United States cannabis retailers and the combined company has massive growth prospects.

Over the next year, the United States cannabis market is expected to experience massive growth and the combined company is well positioned to capitalize on this. The company has significant leverage to some of the most exciting cannabis markets in the United States and this is an important aspect of the story.

iAnthus Capital Holdings has come well off its December lows and the recent rally has been significant. Going forward, we are going to monitor the integration of these two businesses and expect this process to take some time. We expect the companies to find significant synergies between the two businesses and will monitor how the teams are able to execute on this.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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