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The Florida medical cannabis market represents a significant opportunity as the number of registered patients continues to record strong growth. Since March 2018, the patient count has more than doubled to around 170,000 state wide in a state with over 20 million residents. We expect to see the number of medical cannabis patients continue to increase as the number of indications approved by the state increases. Another factor that is supporting growth at the patient level is the increasing number of prescribing doctors which has also doubled in the past year.
It is only a matter of time until recreational cannabis becomes legal in Florida and this will be a major catalyst for the companies that are levered to this burgeoning market. We have been monitoring the Florida medical cannabis market closely and have been focused on finding leading investment opportunities.
One company we have been favorable on is Liberty Health Sciences (LHS.CN) (LHSIF). The company is highly levered to Florida’s medical cannabis market and has turned their sights on penetrating the recreational cannabis market in Massachusetts. These two markets are very exciting, and we are bullish on Liberty due to its leverage to these opportunities as well as the management team, the growth potential, and the valuation.
Today, Liberty Health received a significant upgrade and Canaccord Genuity initiated coverage with a Speculative Buy rating and a $2 price target. This is a positive development that will increase market awareness for the company. When compared to other Florida cannabis operators like Trulieve (TRUL.CN), Liberty Health is significantly undervalued, and we expect this to change as the company continues to execute. Liberty Health has a strong position in the Florida medical cannabis market and is the middle of a major expansion. Once this expansion is complete, the company will be one of the biggest cannabis operations in Florida and we are bullish on the growth potential.
Liberty Health: An Emerging United States Opportunity
2018 has been a banner year for Liberty Health Sciences and we expect 2019 to be even more significant. The company has been reporting much stronger fundamentals and we expect this trend to continue as the number of open dispensaries continues to increase. Liberty Health is in the middle of a major expansion of its production capacity and we are favorable on its growth prospects heading into the end of the year.
Liberty operates four dispensaries and six delivery hubs and has signed six new leases for dispensaries that are at various stages of permitting and construction. Liberty has accelerated their dispensary roll out plan and expects to open three more by the end of October. Once these dispensaries are operational, Liberty will be generating significant revenues and we are monitoring how the team executes on this.
Last month, Liberty announced much stronger quarterly numbers and reported a 95% increase in sales revenue during the period than ended on August 31st. This was the largest revenue increase in the company’s history and we expect this trend to continue for quarters to come. During the quarter, Liberty also reported a 112% increase in the number of patients being serviced by the company’s dispensaries.
Liberty Health is in the early innings of a major growth cycle and its Florida operations are starting to kick into high gear. With more than 10,000 patients being seen at the company's dispensaries as of the end of August, and more dispensaries opening soon, we are bullish on its growth prospects for 2019.
Focused on Being a Low-Cost High-Quality Cannabis Producer
When looking at cannabis companies, it is important to look at the cost of production and what the company is doing to lower this number. The ability to produce high-quality cannabis at a low-cost is what will separate many of the leading players in the cannabis sector. Liberty Health has been focused on being ahead of this trend and recently announced an exclusive partnership with AdaViv to help improve how the company produces cannabis at its Liberty Health Sciences 360 Innovation Campus in Gainesville, Florida.
AdaViv will integrate its adaptive Computer Vision software and Machine Learning platform into Liberty's 360 Innovation Campus and together will look to advance the state-of-the-art in greenhouse technology and precision growing to new levels of productivity and efficiency. AdaViv’s technology enables 24/7 plant-level inspection as well as AI computer vision to uncover hidden plant biometrics that translates data into actionable insights for growers like Liberty. In 2018, AdaViv was selected as one of the first grantees of Microsoft AI for Earth.
The agreement is a testament to Liberty Health's focus on being a cutting-edge cannabis producer. The companies are working to develop new AI-driven analytics for the cannabis industry and refine AdaViv's technology to achieve the highest quality, consistency and yield. The technology will precisely monitor every aspect of the production process and will provide actionable knowledge (backed by real-time data) that will increase production output as well as quality. The partnership also calls for the companies to co-develop a set of data driven solutions and areas of improvements in the current production workflow, leveraging AdaViv's sensing, data capturing and predictive analytics technology.
A Differentiated Growth Story
Last month, Liberty Health became the first cannabis producer in Florida to provide e-commerce and digital transaction services through a software-as-a-service agreement with Alternate Health Corp (AHG.CN) (AHGIF), an international corporation that provides software solutions for the medical cannabis industry.
This provides Liberty Health with a significant growth driver and is a testament to the company’s leadership position in the state. During the summer, the company received Good Manufacturing Practice (GMP) approval from SAI Global for its greenhouse and production facilities in Alachua County, Florida.
The companies were granted approval by the Florida Department of Health to implement FlorPass as the state's first online shopping portal for medical cannabis equipped with a digital transaction system. Patients will now have the ability to browse medical cannabis products, make purchases and arrange delivery through the FlorPass secure online portal. FlorPass is the patient management software of choice for many of the state's leading cannabis clinics and physicians, representing nearly 6,000 medical cannabis patients. Liberty customers will now have online access to the expanding line of high-quality cannabis products with easy to navigate search capabilities, including filtering by brand and price.
FlorPass charges a transaction fee based on a percentage of sales through the system's e-commerce platform. Alternate Health anticipates strong revenues based on its growing patient base and Liberty's strong brand presence across the state. The approval from the Department of Health represents a turning point for accountability and compliance in medical cannabis sales throughout the state.
FlorPass is a blockchain-enabled software platform that manages the end-to-end transactions involved in providing safe access to medical cannabis for eligible patients. The system is accessible by the patient, certified doctors and licensed dispensaries, linked through a seamless interface, and is used to facilitate online purchases of medical cannabis and provide enhanced medical treatment recommendations with a focus on improving patient outcomes.
In the Middle of a Major Expansion in Florida
One of the reasons why we expect Liberty Health to continue to record strong growth is due to increased production space at the 360 Campus. Last month, Liberty Health doubled its cultivation space in response to the growing demand by Florida patients and we are favorable on this development.
Liberty Health received permission to commence production at the 360 Campus while a retrofit of the facilities is being completed. The company's Chestnut Hill facility continues to operate at full capacity. The expansion will increase Liberty's production capacity by an additional 20,000 square feet, bringing the total capacity to 41,200 square feet. This initial phase of the 360 Campus will be used for the cultivation of premium grade cannabis along with R&D for future genetic study programs.
The next phase of the previously announced retrofit program is scheduled to be completed in November and will add an additional 80,000 sq. ft., which will result in Liberty having the largest production capacity of any medical cannabis producer in Florida. The company has several catalysts for growth and this will significantly improve fundamentals.
Once the retrofit is fully operational in early 2019, the company's production capacity will be approx. 225,000 sq. feet. Liberty is well positioned to be a leading medical cannabis producer in Florida and we are monitoring how the team continues to execute.
The new cultivation space at the 360 Campus, once completed, will be environmentally controlled with sophisticated irrigation systems, grow lighting, air filtration exchange, CO2 dosing, and heating and cooling to ensure maximum production of the marijuana plant. To expedite the expansion of Liberty's reach and ensure statewide coverage of its valued customers the Company has also expanded its one-day delivery hub services. All deliveries will now have a turnaround of 24-hours or less throughout the entire state of Florida.
To complement state-wide services, Liberty Health has implemented cutting-edge software to optimize delivery routes, reduce wait time and enhance customer experience. Customers will now receive text message alerts on their mobile devices when their orders are close, keeping them informed, improving delivery anticipation, and reducing missed deliveries. Additionally the 360 Campus will have a state of the art innovation center that will allow for the production of products such as edibles, transdermal, and other delivery methods including water soluble capabilities.
We are favorable on the enhanced technology and the ability do delivery product in a time efficient manner. The focus on the smokeless product market through the innovation center is a very attractive aspect of the story and we expect this to be a major segment of the Florida market. Also, the smokeless products typically have a higher price tag and better margins so this vertical should prove to be a significant growth driver going forward.
Focused on Securing the Best Leases, Brands, and Distribution
Liberty Health, in addition to the existing open locations, has signed leases to open Cannabis Education Centers in Boca Raton, Gainesville, Winter Haven, Palm Harbor, Merritt Island and Miami Beach. These locations will provide significant leverage to attractive markets in Florida and we are bullish on the growth prospects in these markets.
One of the reasons why Liberty is positioned to be a leader in Florida is due to the quality of products offered in the dispensaries. Last month, the company began to produce Liberty's newest and most highly anticipated offering to consumers, Mary's Medicinals. The products that will be available under this brand include: transdermal patches, transdermal gel pens, topicals, capsules, tinctures and vape pens.
Liberty Health has been able to sign exclusive agreements with leading cannabis brands to offer some of the best products available on the market. The company has a major focus on expanding and upgrading its production line and this is a very important part of the story. Liberty also has been focused on providing delivery services to patients and we are favorable on this as well. Liberty has made it so that all deliveries have a turnaround of 24-hours or less throughout the entire state of Florida and this is attractive to consumers and significantly enhances the value proposition.
The company is led by a leading management team that has a proven track record of success and this is a very important aspect of the story. The focus on securing leading brands and on delivery is extremely important and enhances the company’s position in the state. We are favorable on the management team’s ability to create value for shareholders and are monitoring how they continue to execute.
Expands into the Massachusetts Cannabis Market
Earlier this year, Liberty Health expanded its focus to the Northeast and entered the Massachusetts cannabis market by acquiring a 75% ownership interest in William Noyes Webster Foundation (WNWF). This was a significant move and we are bullish on its leverage to the burgeoning cannabis market in Massachusetts.
This was a strategic decision and we are monitoring how the team executes on this. WNWF owns an integrated medical cannabis license and has a cultivation facility and a dispensary location as well as leases and local governmental approvals in place for two additional dispensary locations.
WNWF’s vertically integrated medical cannabis license will allow Liberty to cultivate, process and dispense medical cannabis all under one license. Pending application approval by the Massachusetts Department of Public Health, the transaction will also provide Liberty with two additional integrated medical cannabis licenses.
A Company to Watch
Liberty Health is in the early innings of a massive growth cycle and this is a company that we are monitoring closely. When compared to other United States cannabis operators, the valuation is very attractive and we think the market underappreciates Liberty Health’s growth prospects.
The United States cannabis industry is in its infancy and Liberty Health has attractive leverage to this burgeoning opportunity. To stay up to date with this cannabis company, please email us at email@example.com