Although 2020 has not lived up to expectations for the cannabis industry (so far), we believe that the industry is well positioned to record incremental growth in 2021. We expect the US and certain European and Latin American markets to be the primary growth drivers for the industry and are bullish on the long-term opportunity that is associated with the industry.
Chemesis International Inc. (CSI.CN) (CADMF) is a cannabis company that we are excited about and consider it to be a US and international growth story that owns a diversified portfolio of cannabis and hemp assets. During the last year, the company has been executing on a multi-faceted growth strategy and we are favorable on the structure of the business due to the amount of synergies that can be found between the assets that are owned by Chemesis.
Although Chemesis has been nothing short of an execution story, the recent trend has been mixed and we believe that the opportunity is flying under the radar. Going forward, we believe that Chemesis has substantial potential catalysts for growth and want to highlight the reasons why we are excited about the opportunity:
- Chemesis has attractive leverage to the US cannabis market and has cannabis operations in California and Puerto Rico
- Chemesis is focused on the hemp market in Michigan and plans to expand into additional markets in the Midwest
- The management team is focused on creating value for shareholders and we are favorable on the collective expertise of the team
- At current levels, we believe that Chemesis has a favorable risk-reward profile and are bullish on the potential catalysts that it has for growth in the near and long-term
With leverage to markets like California, Michigan and Puerto Rico, we believe that Chemesis is laser focused on some of the most attractive cannabis markets in the US. At current levels, we are of the opinion that the market does not assign much value to these opportunities and believe that it is missing out on something significant as it relates to these markets.
A few months ago, Chemesis released third quarter financial results and recorded substantial improvements on a number of key areas when compared to the same period last year that we have highlighted below:
- Revenue grew by more than 20%
- Gross profit margins increased by 11% (before biological assets)
- Lowered the amount of debt outstanding
- Appointed Josh Rosenberg as President after the quarter ended
- Completed two private placements
- Formed strategic partnerships to enhance the consumer experience
Over the next year, we expect Chemesis to announce substantial developments as it relates to the markets it is levered to as well as updates on the expansion strategy. The management team is highly focused on increasing the number of revenues streams that it has in place while ramping up existing revenue streams.
At currently levels, we believe that Chemesis has a compelling valuation and a favorable risk-reward profile. Following the completion of two private placements, the company has the capital that it needs to further execute on its multi-faceted growth strategy.
Going forward some of the most significant potential catalysts for growth include spinning out of La Finca (the Latin America asset), increasing market share in states that it is levered to, and entering new cannabis and hemp markets. We believe that Chemesis is flying under the radar and will monitor how the management team continues to drive the story forward.
If you are interested in learning more about Chemesis, please send an email to email@example.com to be added to our distribution list.
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