Flora Growth Corp. Is Setting Up To Capitalize On Several Catalyst For Growth Going Into Years End

During the last quarter, Flora Growth Corp. (NASDAQ: FLGC) has come under considerable pressure and the trend caught our attention.

The pullback follows a substantial move to the upside earlier this year and we believe the recent decline is overdone. During the last quarter, the Latin American cannabis company has announced a series of positive developments and we are of the opinion that Flora is well positioned to record strong growth on a going forward basis.

One of the most significant recent milestones reported by Flora was the receipt of the Good Agricultural and Collection Practices (GACP) certification by the Control Union Medical Cannabis Standard (CUMC). This development was reported less than two weeks ago and will allow Flora to export its high-quality dry cannabis flower to international good manufacturing practice (GMP) active pharmaceutical ingredient (API) producers or to markets where cannabis flower can be imported.

The combination of the GACP certification with a recent law change in Colombia has put Flora in a position to record strong revenue growth. The company has been actively cultivating and harvesting cannabidiol (CBD) with yields that are approx. 40% to 60% higher than what the management team originally expected.

A Company With Several Substantial Growth Catalysts

Flora is led by a management team that has been flawlessly executing on a multi-faceted expansion strategy and we believe the market does not fully appreciate the potential catalysts that are associated with the story. We are of the opinion that 7 of the most significant potential catalysts are:

The Latin American cannabis company expects to have an initial harvest of cannabis flower that has a high amount of tetrahydrocannabinol (THC) in November

The fulfillment of previously signed letters of intent (LOIs) where Flora will sell dried cannabis flower and derivative products to international markets like the European Union (EU), Australia, and Panama. The management team expects to start fulfilling these orders in the fourth quarter of 2021

The completion of its work with Hoshi International on the pre-audit process with Malta as it relates to receiving an EU-GMP certification for Flora’s extraction facility
Flora has been forming strategic relationships for its beauty product brands, MIND Naturals and Awe (Ô). The company signed an agreement with SHOWFIELDS to feature its two skincare brands at its South Beach store and an agreement with GlossWire to be featured on its digital beauty marketplace
Flora recently expanded into Panama and we expect it enter other Latin American markets in 2022. Going forward, we expect the Latin America cannabis market to serve as a more significant growth driver
Launched Flora Pharma to identify gaps in the cannabis industry and to develop pharmaceutical products. Its objective is to create and use a drug development platform in collaboration with artificial intelligence (AI) and a machine learning group to identify cannabis compounds that are responsible for specific diseases
The company accelerated its plan to enter the EU market through a strategic investment in Hoshi International, a fully integrated cannabis company that is focused on cultivating, manufacturing, and distributing cannabis products throughout the EU.

Executing on Strategic Growth Plan for the Cosechemos Facility

So far this year, Flora’s primary focus with Cosechemos has been optimizing and scaling cultivation and processing activities while working to be granted the certifications that are needed to commercially distribute medical-grade cannabis products to certain international markets.

Over the next year, we expect Flora to record strong growth and believe its leverage to Latin America and the EU are a core pillar of the story. The management team has the business well positioned to unlock significant value from its flagship cultivation and processing facility, Cosechemos, as it continues to focus on expanding its global distribution network

By already having signed LOIs for the distribution and sale of dry cannabis flower and derivative products to several international jurisdictions (the EU, Australia, and Latin America), Flora is positioned to rapidly capture market share in burgeoning cannabis markets. We believe the scale of the company’s global footprint has substantially improved by focusing on strategic international markets and consider this to be an underappreciated aspect of the story.

The granting of the GACP certification is a testament to Flora’s ability to offer premium cannabis products and represents an important precursor to being granted the GMP certification. Once the company receives the GMP certification, it can start to produce pharmaceutical-grade cannabis products and cannabinoid-based APIs.

Flora’s Business Economics are too Attractive to Ignore

When we first started to cover Flora, one of the initial statistics that stood out was the cost per gram. The team at the Cosechemos facility reported producing cannabis for $0.06 per gram and we find the economics that are associated with this price point to be very attractive. By cultivating cannabis for such a low-cost, the team has shown how it has maximized the cultivation potential that is provided by the climate and infrastructure.

Colombia is known for having the ideal climate for cultivating cannabis and operators have reported to be growing cannabis for a much lower cost per gram. When compared to North America, the economics associated with the cannabis industry in South and Central America are much more attractive.

During the last few years, several Latin American cannabis companies have not been able to execute on growth strategies that are similar to Flora. We believe the lack of execution by other high-profile Latin American companies have impacted how the market views these businesses and are of the opinion that Flora has been unnecessarily impacted by this trend. As the management team continues to execute and reports quarterly earnings, we expect to see a change in market sentiment if the company can continue executing on its growth initiatives.

At current levels, we believe that Flora has a compelling valuation and a favorable risk-reward profile. We are of the opinion that the company’s strategic investments and sales agreements has de-risked the opportunity over the long-term and our readers should be aware of this. Flora’s stock price has fallen more than 60% from its 2021 highs and is an opportunity that we will be highly focused on in 2022 and beyond.

If you are interested in learning more about Flora Growth’s plan to capitalize on the global cannabis market, please send an email to support@technical420.com with the subject “Flora Growth” to be added to our distribution list.

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