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When it comes to strategic international markets for the cannabis and hemp industry, Asia has been one of the least talked about regions. We believe the region will play a key role in the growth of the global cannabis and hemp industry and expect to see more countries focus on this market in the coming years.
Earlier this year, Thailand legalized the production and use of hemp in products that range from cosmetics to food and from beverages to medical supplements. According to the law, this product must contain less than 1% of tetrahydrocannabinol (THC).
Last week, Audacious Brands (CSE: AUSA) (OTC: AUSAF) reported plans to capitalize on Thailand by forming a strategic partnership with Golden Triangle Health (GTH), a subsidiary of NR Instant Produce PCL (NRF) which is a leading southeast Asian food manufacturer and distributor that produces its own signature brands private label products and co-packaging lines.
The purpose of the partnership is to develop GTH into a leading CBD operator in Asia. With Audacious, the partnership will receive advisory services, operational intelligence, and better brand visibility in Thailand and other international markets. We are favorable on the goal of the partnership and expect a successful outcome to serve as a major catalyst for growth.
The Thailand-based business represents a strategic partner for Audacious and we are favorable on the long-term potential that is associated with the hemp and cannabidiol (CBD) market in southeast Asia. According to the term sheet, the partnership is focused on manufacturing and marketing CBD and hemp-infused products in Thailand. We consider GTH to be a strategic partner due to its established distribution network that will result in the partnership penetrating and capturing market share in southeast Asia.
Each Company Adds Valuable Expertise to the Partnership
A core pillar of our bullish view on the partnership is related to the expertise that is provided by each company. Audacious brings a proven track record of success and valuable intellectual property (IP) to the partnership. The company will also help GTH optimize operations and the product development process while providing access to its joint marketing and influencer networks with the goal of establishing a leader in the rapidly growing Asian CBD market.
We are of the opinion that the combination of GTH’s brand equity and strategic relationships with Audacious’ IP and track record provides the partnership with the foundation that is needed to become a leading CBD operator in Asia. We expect Thailand to serve as a launch pad for the partnership to enter new markets in Asia and are bullish on the potential value that can be generated through the relationship.
Earlier this year, hemp was legalized in Thailand and the government has granted a limited number of licenses. The structure provides GTH with an early mover advantage and Audacious with a well-established partner in the hemp derived CBD market. Through the partnership, Audacious is well positioned to expand into additional international markets and we consider this to be an attractive aspect of the story.
GTH believe Thailand’s CBD industry is barely in the first inning of a major growth cycle and expects the market to reach approximately $1 billion at maturity. We are bullish on the growth prospects that are associated with the emerging market and will monitor how the industry advances in 2022 and beyond.
A Partnership Where the Companies Have Aligned Objectives
Another reason for our favorable view on the partnership is related to how the companies are aligned from a capital light expansion strategy standpoint. Under the agreement, Audacious is not required to provide capital for construction, working capital, or any other purpose.
GTH’s parent company is expected to support the partnership by providing access to its well-established distribution network throughout Thailand, Asia, and North America. We believe GTH is focused on executing on a multi-faceted growth strategy that is centered around distributing products through e-commerce and business-to-consumer (B2C) networks.
We are favorable on the amount of brand power that is associated with the partnership and expect this focus to play a key role in how the product line generates traction at the consumer level. Another benefit that GTH brings to the relationship is through its network of Asian social media influencers which is expected to enhace brand recognition.
Through GTH, the partnership will have access to a broad portfolio of infused and non-infused (industrial hemp) products. The structure of the product portfolio provides the partnership with diverse revenue streams and we are favorable on how this could positively impact the amount of potential customers the brand could have.
We expect the partnership to benefit from being the exclusive distribution partner for Cookies in Asia (excluding Japan). Cookies started in California and we consider it to be one of the most popular cannabis brands in the US. The brand name resonates with a wide range of consumers and has a cult like following. During the last year, we have seen Cookies products enter new state markets in the US and the performance of the brand has been impressive.
We consider the terms of the agreement to be favorable for both parties and believe our readers need to be aware of this aspect of the relationship. From the expertise being contributed by each company to the partnership to the share swap being contingent on GTH achieving profitable operations, we believe the structure is de-risked for Audacious and find this to be significant.
If GTH is able to follow through and execute on the agreement, Audacious will have a 25% ownership interest in GTH and can nominate people for three board seats. We are of the opinion that with the board seats Audacious will be able to have a significant impact the direction of the partnership and are favorable on this.
A Thailand Brand That is Positioned to Record Strong Growth
GTH has entered into a five-year contract with Khon Kaen university to utilize their land (up to 1,000 acres) for cultivation, as well as the university’s harvesting and processing equipment for the production of hemp-based products. We are favorable on the relationship with the university due to how it has already benefited GTH.
GTH has developed a number of products that it is currently selling in Thailand. Upon execution of the final agreement, the companies will work together on developing brand and additional infrastructure, with ALPS providing facility design services for a new indoor facility to augment the existing outdoor grow, as well as crop consulting services to improve yields of the outdoor facility.
GTH was spun-off by NRF which specializes in the production and distribution of oriental and plant-based food products. As part of the relationship, NRF will be working with Audacious and GTH to drive and accelerate growth in Thailand as well as other strategic international markets.
A Potential Long-Term Growth Driver to be Aware of
Over the long-term, Audacious could become an export partner for GTH’s diverse hemp and CBD product portfolio. According to the agreement, products will be sold under the GTH brand and we will monitor how the brand benefits from also selling through business-to-business (B2B) channels as a part of white label agreements.
NRF plans to work with GTH to distribute hemp-base food products by adding it to its successful plant based product portfolio. The companies are in discussions or have entered into multiple partnerships with several leading health and wellness brands in Thailand for the development of CBD-based products under white label agreements.
NRF and GTH have formed a partnership with two of Thailand’s leading B2B distributors who service major retail operators (i.e. Unilever, 7Eleven, P&F Super Drug, Boots Asia, and more) and we are favorable on how these relationships can benefit the brand’s growth. Through NRF, GTH is collaborating and conducting research on the development of a CBD-infused beverage line with Thailand’s leading energy drink brand.
A Growth Story that is Trading for a Discount
2021 has been a banner year for Audacious and we believe the management team has the business well positioned to record strong growth over the near and long-term. We believe the company owns strategic assets and offers products and services that are in high-demand.
Audacious is led by a management team that has a proven track record in the cannabis industry and we are favorable on the assets that are owned by the business. From strategic investments in US multi-state operators to a 51% ownership interest in ALPS, the company owns a portfolio of valuable cannabis assets and we believe the market does not fully appreciate this.
We believe that Audacious has substantial potential catalysts for growth and expect it to announce several important milestones in 2022. During the last year, the company has expanded into several burgeoning cannabis markets and we are of the opinion that the business is well positioned to record strong growth on a going forward basis.
We expect the recent developments and partnerships to start impacting quarterly financial results in 2022 and believe the market does not fully appreciate this aspect of the story. When compared to other cannabis operators, Audacious is trading at a considerable discount when valued on certain profitability metrics and consider it to be an underappreciated opportunity.
If you are interested in learning more about how Audacious Brands is positioned to capitalize on the global cannabis market, please send an email to support@technical420.com with the subject “Audacious Brands” to be added to our distribution list.
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Pursuant to an agreement between StoneBridge Partners LLC and Australis Capital Inc. we have been hired for a period of 180 days beginning September 13, 2021 and ending to publicly disseminate information about (AUSA) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (AUSA) for or were paid “ZERO” shares of unrestricted or restricted common shares. We plan to sell the “ZERO” shares of (AUSA) 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 (AUSA) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.
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