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Earlier this month, we highlighted Flora Growth Corp. (FLGC: Nasdaq) as an emerging growth story and believe that it has attractive growth prospects.
Flora Growth is highly focused on capitalizing on strategic international cannabis and hemp markets and is executing on a strategy that is in line with this mission. The company recently commenced trading on the Nasdaq and is an opportunity that we believe is flying under the radar.
Last week, Flora announced a major milestone and reported to have signed a letter of intent to acquire 100% of Switzerland-based Koch & Gsell as well as its wholly-owned hemp brand, Heimat. The brand is comprised of a variety of hemp products that contain less than 1% tetrahydrocannabinol (THC). Koch & Gsell manufacture and distribute the brand in more than 2,500 stores in Switzerland and we are favorable on this aspect of the story and the potential for deeper penetration into the European Union (EU) and beyond.
Heimat has become a leading hemp cigarette brand in Switzerland and is led by a management team that is highly focused on expanding rapidly throughout Europe. The brand is also focused on entering Asian markets and we are favorable on the amount of value that could be generated via these regions over the long-term.
Acquisition Should Serve as a Significant Growth Catalyst
One of the reasons we are excited about the potential acquisition is related to the growth of the business as well as Flora’s plan to invest approx. $2.2 million to rapidly expand the brand into new markets as well as strengthen its position in the Swiss market. During the last year, Heimat generated $7.6 million of revenue (on a trailing twelve-month basis) and we are favorable on the growth prospects that are associated with the planned expansion.
By leveraging Koch & Gsell’s existing distribution network, Flora plans to introduce its portfolio of leading brands (i.e. Mind Naturals, Mambe, and Almost Virgin) in Switzerland and the EU. We consider the existing distribution network to be a key aspect of the acquisition and will be monitoring how the products gain traction once launched.
Another reason for our positive view on the transaction is related to the plan to keep Koch & Gsell Founder and CEO Roger Koch on the team. We expect his continued involvement will make the transition seamless and believe that he will play an important role in how new products are rolled out in Switzerland, strategic EU markets, and abroad. Koch has been responsible for growing the Heimat brand since its inception and the new influx of capital should accelerate his vision of entering new international markets.
Beyond the Heimat brand, the transaction includes additional strategic assets that we expect to benefit the entire Flora portfolio and business. According to the agreement, Flora will acquire all of Koch & Gsell’s hemp, blended hemp, and tobacco cigarette manufacturing technology. The patented technology can produce over 40,000 packs (20 cigarettes per pack) daily. Going forward, Flora plans to use the technology to expand into new markets to produce hemp, cannabis, or blended cigarette products.
An Emerging Growth Story
At current levels, we believe that Flora has a compelling valuation and a favorable risk-reward profile. We are bullish on the growth prospects that are associated with Koch & Gsell and will monitor how the transaction supports the growth of the entire business.
Over the next quarter, we expect Flora to expand into additional strategic international markets in the EU and Latin America. By focusing on the sale of CBD products, the company will own strategic infrastructure assets in emerging international markets and we are favorable on the potential revenue streams that are associated with the strategy.
Over the long-term, Flora expects to scale production and supply cannabis derivative products to the global market. Due to the scale and the diversity of the business, the company should see margin appreciation as it continues to grow. Based on this structure, the management team is inclined to execute quickly and capture additional market share.
If you are interested in learning more about Flora Growth, please send an email to support@technical420.com with the subject “Flora Growth” to be added to our distribution list.
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Pursuant to an agreement between StoneBridge Partners LLC and Flora Growth Corp. (FLGC) we have been hired for a period of 180 days beginning May 13, 2021 and ending November 13, 2021 to publicly disseminate information about (FLGC) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (FLGC) and were not issued any shares of restricted common shares. We own zero shares of (FLGC), which we purchased in the open market. We plan to sell the “ZERO” shares of (FLGC) 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 (FLGC) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.
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