In late October, we attended the MJ Business Conference in Las Vegas and had the opportunity to meet with members of Audacious Brands’ (CSE: AUSA) (OTC: AUSAF) management team.
The timing of our meeting was perfect, as we spoke with AUDACIOUS executives after they launched a new service for cannabis companies that are planning to construct new facilities or expand/upgrade existing ones. The product line includes two types of facility offerings, the GrowQuick and the Achieve series.
We are favorable on the new business line and believe that it further differentiates Audacious from the competition. The services combine standardized, custom turn-key facility designs with project management, commissioning, operational support services, and financing assistance. We find the diversity of the solutions that are offered to be important and believe that there will be substantial demand for these services. Furthermore, we anticipate that on the back of these facilities AUDACIOUS will be able to secure further cost-plus supply arrangements such as the one with Belle Fleur.
A Service that is Designed for Cultivators of Any Size
An important part of the product offering is related to the types of formats that are offered. Currently, the new offering comes in the following four formats:
- GrowQuick – delivers approx. 100 to 2,000 pounds of cannabis per year
- Achieve 12 – delivers approx. 12,000 pounds of cannabis per year
- Achieve 18 – delivers approx. 18,000 pounds of cannabis per year
- Achieve 24 – delivers approx. 24,000 pounds of cannabis per year
First off, the enhanced time to market these services offer is a big selling point for cannabis companies looking to shorten the time to revenue. Furthermore, these services being powered by ALPS, we know the quality of the product will be high and the operating costs will be low, key competitive differentiators.
From a size standpoint, we are favorable on the diversity of the formats and believe the different sizes will allow Audacious to attract a wide variety of clients. Some key features of the formats include: European Union good manufacturing practices (EU GMP) design compliance, tissue culture propagation, post-harvest processing systems, energy saving horticultural grade lighting, and more.As demand for cannabis continues to increase, companies will need to expand and increase production capacity to capitalize on the higher demand. The GrowQuick and Achieve offerings were developed to deliver premium cannabis at competitive prices. The offerings provide Audacious with a high margin revenue service and the opportunity to enter into low-cost cannabis supply agreements.
The New Solution Could De-Risk Projects for Clients
Management expects clients to benefit from the strength of the ALPS and Audacious brand when it comes to securing capital to finance projects at the lowest possible cost. A key benefit of the service is related to how it significantly reduces the amount of time it takes to complete a custom design that complies with regulations and we find this to be a major advantage.
Although custom facility designs typically take a substantial amount of time to complete, Audacious has front-loaded the time, effort, and energy that a custom design requires. For more than 35 years, ALPS has been constructing state-of-the-art facilities in countries all over the world and has amassed invaluable expertise over this time. The service provides Audacious with a de-risked solution to quickly bring premium products to market and generate high margin revenue through the low operating cost nature of its designs.
We are favorable on how Audacious structured the solutions as high-performing turn-key packages and expect the service to serve as a catalyst for growth. From economics to risk mitigation, the GrowQuick and the Achieve series can provide clients with several important material benefits.
ALPS Represents a Core Growth Pillar for Audacious
During the last few years, we have seen what could happen if a facility is not properly constructed. Several large-scale Canadian Licensed Producers (LPs) have been forced to close facilities that cost more than $100 million to build and this has created a major problem for certain operators.
Through ALPS, Audacious makes sure that an efficient work-flow process is implemented on day one. By executing a certain design strategy, ALPS’ approach allows for the lowest cost of production as soon as cultivation begins and we find this to be a core pillar of the service.
During the last decade, the legal cannabis industry has developed rapidly, creating a still humongous global opportunity. As the industry advanced, so did the standards for products. Constructing a well-designed facility simply is not enough anymore in the current market environment and companies need to be able to define, track, report and adjust operational metrics such as quality, yield, and throughput.
By linking these data points together, a company can enhance competitiveness through operational excellence. Through ALPS, Audacious is able to achieve this through a new offering that is called APIS. The offering is a complementary suite of services that aligns the cultivator, management, and operational practices in a customized solution for controlled environment agriculture (CEA) facilities. APIS enables the integration of owner objectives and we are favorable on how this offering complements the new service offering.
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.
Currently, ALPS is actively working on cannabis and traditional horticulture projects in the US, Canada, Denmark, Finland, Iceland, Germany, Netherlands, Bahrein, United Arab Emirates (UAE), Southeast Asia, and Australia. So far, the company has secured contracts or are in late-stage negotiations in Australia, UAE, Bahrain, Canada, Finland, Germany, Iceland, Jordan, Kuwait, Netherlands, Saudi Arabia, Denmark, Massachusetts, Arizona, Nevada, Washington, Michigan, Missouri, Oklahoma, Colorado, Florida, Illinois, Maine, Maryland, New Mexico, Pennsylvania, Wyoming, and California.
With this type of global footprint, Audacious has substantial potential catalysts for growth and we are bullish on this aspect of the story. Over the next year, we expect the company to announce several important milestones in the markets its focused on and believe the new service offering will play an important role in the long-term success of the company.
Although the US cannabis company has reported a series of important developments so far this year, the recent trend has been to the downside. At current levels, we believe that Audacious has a compelling valuation and a favorable risk-reward profile.
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 firstname.lastname@example.org with the subject “Audacious Brands” to be added to our distribution list.
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