During the last quarter, the cannabis sector has been under pressure and this is a trend that we have been closely following. The recent weakness has put significant pressure on leading cannabis businesses, and we are favorable on the opportunities that will be created as a result of this weakness.
Although many investors have flocked to the companies that are growing massive amounts of cannabis, we continue to look for opportunities that have significant growth prospects as well as an attractive valuation. One company that we have been excited about is Empower Clinics Inc. (CBDT.CN) (EPWCF) which is a leading multi-state operator of a network of physician-staffed cannabis clinics.
Empower has been operating as a vertically-integrated health and wellness brand and is in the middle of a major expansion. The company is working on the completion of its first hemp-derived CBD extraction facility that can produce and package its proprietary line of cannabidiol (CBD) based products. Once this is completed, Empower will be able to distribute across the US through company owned and franchised clinics, wholesale partnerships, big box retailers, and e-commerce platforms.
Launches Franchise Strategy and is Positioned for Growth
A few weeks ago, Empower Clinics reported a significant development and announced the launch of its new clinic brand Sun Valley Health as well as the launch of a nationwide clinic franchise program. These represent a major milestones for the company and we will be monitoring how the team continues to advance the story from here.
Under this strategy, Empower is consolidating its clinic operations under one consistent brand, merging the existing clinic operations of Sun Valley Clinics in Arizona and Nevada, plus the existing physical and mobile clinic operations of Empower Clinics in Oregon and Washington state . We are favorable on the decision to put all of the company’s clinics under the Sun Valley Health brand and expect this to help with the expansion process.
We are favorable on the move to officially launch the Sun Valley Health franchise program and are bullish on the growth prospects associated with this opportunity. Having finalized the 2019 Franchise Disclosure Document (FDD) and by completing the 2019 franchise audit, Empower is able to accept applications for a Sun Valley Health franchise throughout the US and we will monitor how the team is able to execute on this program.
Under the franchise model, franchisees retain the rights for specific territories where they can operate Empower clinics and sell company branded CBD products. Under the model, Empower is entitled to receive upfront franchise fees, ongoing clinic royalties, product royalties, and will own the patient database information. We are favorable on the structure and the amount of value that can be created for Empower.
An Emerging CBD Business will help Fuel Growth
One of the reasons we are excited about Empower is due to the expansion plan as well as the CBD opportunity. During the last year, the company has pivoted its strategy to focus on the burgeoning CBD opportunity and we are favorable on the assets in place to execute on this. Empower has been nothing short of an execution story when it comes to building out a database of medical cannabis patients and find this to be a significant aspect of the business.
Earlier this year, Empower announced plans to open its first fully functional hemp-based CBD extraction facility in Portland, Oregon in the second quarter of 2019. The 5,000 sq. ft. facility is capable of producing more than 6,000 kilograms of extracted product per year and we are favorable on the amount of revenue that can be generated from this. The location offers Empower significant room to expand and can hold four extraction systems that can produce more than 24,000 kilograms per year.
Empower has started selling its Sollievo products through its network of company-owned clinics and we are favorable on the growth prospects associated with the opening of additional clinics. Empower’s patients and customers will be able to access the company’s home delivery and e-commerce platform, and are expected to benefit from access to high margin derivative products. We are favorable on the amount of revenue that can be generated through the sale of CBD products to a network of more than 165,000 patients and will monitor how the team is able to execute.
Sun Valley already has a well-established CBD product line and we expect this to be complimentary to what Empower has accomplished with its Sollievo brand. So far, Empower has a number of distribution strategies for Sollievo and we are favorable on the growth prospects associated with this aspect of the business. The company’s products target a number of indications (sleep, chronic pain, insomnia, digestion, anxiety, and more) and we are favorable on the diversity of these products.
An Opportunity that is Flying Under the Radar
Over the next year, we expect to see Empower start to generate significant revenues through its network and believe that the market does not fully appreciate this aspect of the story. The launch of the franchise program represents a major development and we are bullish on the amount of value that can be created for the company through this initiative.
Empower has a number of avenues to expand its reach and will be able to generate strong revenues through its multi-faceted growth strategy. At current levels, we find the risk-reward scenario to be attractive and believe that this is an opportunity to monitor. The current valuation provides significant upside potential and we are favorable on this.
To learn more about how Empower Clinics is positioned for growth, please reach out to firstname.lastname@example.org.
Pursuant to an agreement between StoneBridge Partners LLC and Empower Clinics we have been hired for a period of 180 days beginning May 28, 2019 and ending November 28, 2019 to publicly disseminate information about (EPW) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (EPW) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero (0) shares of (EPW), which we purchased in the open market. We plan to sell the “ZERO” shares of (EPW) 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 (EPW) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.