Last month, we published an update on Chemesis International Inc. (CSI.CN) (CADMF) which has been laser focused on the US cannabis market and this is an opportunity to put on your radar.
2019 has been a banner year for the US cannabis company and we are favorable on the way the story has evolved so far this year. Through a series of acquisitions, Chemesis has been able to position itself in strategic cannabis markets and we are favorable on this aspect of the story. Over the next year, we expect the company to start to report strong revenue growth and this is a trend that is expected to become more significant in 2020.
Today, we have published an update on Chemesis International and this comes after the company reported a major development. During the last few months, the company has been trending lower with the rest of the cannabis sector and we believe that the market may be missing out on something big.
Acquires Controlling Ownership Interest in a U.S. Multi-State Operator
Chemesis is one of the few cannabis companies to be highly focused on the opportunity in Puerto Rico and we believe that the market does not assign much value to this side of the business. A few weeks ago, Chemesis reported to have enhanced its leverage to this burgeoning cannabis market through the acquisition of a controlling interest in GSRX Industries Inc. (GSRX). Earlier this year, the company made its initial investment in GSRX and we are favorable on the way these assets complement the existing business.
Over the next year, we expect GSRX to play a key role in the success of Chemesis and will monitor how the combined company is able to increase market share in strategic cannabis markets. As a result of the acquisition, GSRX is a subsidiary of Chemesis and its assets (including the 7,291,874 Chemesis common shares that it owns) will be consolidated with Chemesis on a going-forward basis.
One of the reasons we are bullish on the transaction is due to the way it expands the Chemesis operation. Through the acquisition of GSRX, the combined company is a fully vertically integrated, multi-state operator with assets in six states (California, Tennessee, Arizona, Michigan, Texas, and Puerto Rico). GSRX’s asset portfolio includes:
- Five operational dispensaries in Puerto Rico, which operate under Green Spirit Rx brand
- Five additional pre-qualified dispensaries in Puerto Rico that are in various stages of development and construction.
- A fully licensed cannabis distribution center in Point Arena, California that is expected to service over 400 dispensaries in Northern & Central California.
- The Green Room, a boutique dispensary located in Point Arena California that has been owned and operated since April 2018.
- The Green Room, a 4,500 sq. ft. large scale dispensary located in Palm Springs, California. The dispensary is currently undergoing renovations and expects to be open by the first quarter of 2020.
- Retail CBD stores in Texas and Tennessee, with products such as creams, balms, tinctures, pet products, face masks, vape pens, and soft gels.
Another reason we are bullish on the transaction is due to the value that each company brings to the table. Chemesis has extensive manufacturing, extraction, distribution, and processing capabilities, which complement GSRX’s ability to operate cannabis dispensaries. Chemesis intends to leverage its facilities and processing capabilities to manufacture finished goods for GSRX’s operating dispensaries, with the aim of further increasing margins and operational efficiencies.
A Multi-Faceted US Growth Story
Following the completion of the GSRX transaction, Chemesis is better positioned to capitalize on the US cannabis industry. When this development was reported, the company also announced the completion of a $1.4 million non-brokered private placement and we expect the proceeds to be put to work in ways that advance this current business.
Going forward, Chemesis is well positioned to record strong growth and we are especially favorable on the leverage to the California and the Michican markets. These recreational cannabis markets represent significant growth verticals for the overall business and believe that the market underappreciates this aspect of the business.
During the last year, Chemesis has been executing on all cylinders and is led by a management team that has had its finger on the pulse of the industry. From CBD to THC, the company is focused on several of the most attractive verticals of the cannabis industry and we find this to be significant. Chemesis represents a multi-faceted growth story that is trading at a discount when compared to its peers.
Chemesis has come off its recent lows and momentum has been trending higher. This is an opportunity that is flying under the radar and one that we are excited about. To learn more about Chemesis, please reach out to firstname.lastname@example.org and we will add you to our distribution list.
Pursuant to an agreement between StoneBridge Partners LLC and Chemesis International we have been hired for a period of 365 days beginning July 15, 2018 and ending July 15, 2019 to publicly disseminate information about (CSI) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month for a period of 3 months. We own zero shares of (CSI), which we purchased in the open market. We plan to sell the “ZERO” shares of (CSI) 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 (CSI) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information. This contract has been renewed for a period of 180 days beginning on August 2, 2019 and ending on February 2, 2020.