Body and Mind has the Potential to be a Leading US Cannabis Operator

Earlier this week, Body and Mind Inc. (CSE: BAMM) (OTCQB: BMMJ) issued an update on advancement of the business and we are bullish on how the long-term growth prospects that are associated with the multi-state-operator (MSO).

A core pillar of our thesis on Body and Mind is related to how the management team continues to execute on a US expansion strategy in a cost efficient manner. Although Body and Mind has been able to expand into new markets at a much lower cost when compared to other US MSOs, we believe the market is not assigning much value to these emerging markets.

While Body and Mind has fewer resources when compared to MSOs with a similar operational footprint (based on the amount of cash/cash equivalents on the balance sheet and the number of states the operator has leverage to), the management team has been able to enhance the growth profile by executing on a low-cost expansion strategy in the Midwest (Arkansas, Michigan, and Ohio) and in the West (California and Nevada).

Another core pillar of our thesis on Body and Mind is related to the performance of the business in Las Vegas. The company was an early mover on the Nevada market and we believe the brand was able generate significant awareness with in-state and out-of-state consumers. We are of the opinion that the brand benefited from being a first mover due to the number of tourists that visit Las Vegas each year.

When you combine these two factors with an attractive product portfolio, we believe Body and Mind has immediate brand awareness in the new markets it enters. In the operational update, Body and Mind highlighted the performance of the wholesale side of the business in the states it recently started to capitalize on.

We believe the US cannabis operator is in the early innings of a major growth cycle and is well positioned to capture market share in several underappreciated states. Below, we have provided a brief recap on the performance of the business in certain markets as our readers need to be aware of these advancements.

Ohio – Body and Mind has been executing on a manufacturing expansion and is selling branded products from its dispensary in Cleveland and from more than 10 dispensaries in the state. In the near future, the company expects to start selling popular edible products after receiving final approval for kitchen operations in Ohio.
Arkansas – The business finished phenotyping new strains at its cultivation facility and has ramped up cultivation operations. Body and Mind has been selling flower from its dispensary in West Memphis and has been increasing the amount of branded cannabis flower that is being sold from other dispensaries in Arkansas. The MSO has formed collaborations with renowned Arkansas extractors to sell Body and Mind branded concentrates and has been benefiting from the home delivery opportunity in the state
California – Body and Mind has been forming strategic collaboration agreements to sell custom branded products in the dispensaries it owns in the state. Going forward, the company plans to review additional collaboration opportunities while advancing its manufacturing operation process through final local approvals. We consider San Diego to be one of the most attractive markets in California and are bullish on the leverage the brand has to certain regions in the state

A US Growth Story that is Trading for a Discount

So far this year, Body and Mind has reported a series of positive developments from several high-profile medical and recreational markets in the US and we are impressed with how the management team has been able to continue to execute on its previously announced low-cost expansion strategy.

Over the next year, we believe the US cannabis operator will capture additional market share in the limited license states it has leverage to (Arkansas and Ohio). We are of the opinion that the market does not fully understand the growth prospects that are associated with its US cannabis footprint and consider the business to be undervalued.

When analyzing the markets that Body and Mind is levered to, there are several factors that make us more bullish on the potential for the business in the near and long-term. Some of the most important factors include:

Body and Mind is noticing a shift in the overall revenue mix and we primarily attribute the change to the diversification of the business
There has been a considerable decrease in the amount of time it takes for the business to start generating traction in new markets. We believe the business has benefited from ramping up the wholesale side of the business and from forming strategic collaborations in several markets
The US cannabis operator is in the process of ramping up production in Ohio and has been capitalizing on the wholesale market in Arkansas. In Ohio, we expect the company to record and increase in the percentage of licensed dispensaries which sell its products by the end of the year. In Arkansas, Body and Mind has been capitalizing on the wholesale market and is the first brand in the state to be sold by non-company owned dispensaries.

At current levels, we believe Body and Mind has a favorable risk-reward profile and has considerable upside potential. We are impressed with how the management team continues to execute on a significant coast-to-coast expansion with the resources it has on hand. We are of the opinion that the MSO will benefit from taking a patient approach to growth and continue to classify the business as one of the most undervalued US cannabis operators.

If you are interested in learning more about Body and Mind and the markets the business is levered to, please send an email to support@technical420.com with the subject “Body and Mind” to be added to our distribution list.

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