Earlier this year, we highlighted Heritage Cannabis Holdings Corp. (CSE: CANN) (OTCQX: HERTF) as an undervalued cannabis business and standby this statement after the business has reported several significant milestones.
Last week, Heritage reported an important milestone and was approved by the Brazilian Health Authority (ANVISA) to export its first formulated cannabidiol (CBD) product to Brazil. As part of the update, the company also reported to have achieved stability on two additional products that are awaiting final approval and we are favorable on the development.
In 2021, Health Canada granted Heritage with the first ever license to export cannabis products from Canada to Brazil, and Heritage successfully shipped products to enter the testing phase with ANVISA. We believe this is a testament to the management team’s ability to execute and are bullish on the growth prospects that are associated with the international market.
Heritage is one of the few Canadian cannabis companies to have leverage to both the United States and international markets. We consider Brazil to be an attractive opportunity for the company due to the size of the population and its early mover advantage. Over the next year, we expect international markets to make up a larger percentage of Heritage’s revenue and will monitor how Brazil supports this.
Expected to Benefit From Missouri’s Recreational Market
A week before the Brazil announcement, Heritage issued an update on the Missouri market and we are favorable on this aspect of the story. The state recently started to allow for the sale of recreational cannabis and we are impressed with the growth of the market.
Through its relationship with Como Health LLC (d/b/a 3Fifteen Primo Cannabis), Heritage has been selling cannabis product in Missouri since January. The products are being sold at 3Fifteen’s medical dispensaries in Missouri, including 12 stock keeping units (SKUs) on shelves. By the end of April, we expect the number of SKUs to significantly increase and we are bullish on the growth prospects that are associated with the market.
We expect Heritage to benefit from its first mover advantage on the medical side of Missouri’s cannabis industry and believe the market undervalues this aspect of the story. With this type of positioning, we believe Heritage is poised to capture a piece of the recreational market and see positive cash-flow from sales in Missouri.
According to Benzinga, there were almost $13 million of cannabis sales in Missouri during the first three days ($4.2 million was medical cannabis and $8.5 million was from recreational sales). Another positive data point we found was from the St. Louis Business Journal which said there were approx. $103 million of cannabis sales in February in Missouri. The publication said the state could be one of the fastest to reach the $1 billion of annual sales milestone and we expect Heritage to be a beneficiary of this growth.
Although Missouri is not one of the largest states in the US, demand for cannabis is higher than what we expected. Over the next year, we expect Heritage to report stronger sales numbers from the state and believe the market is not assigning enough value to this aspect of the business.
At current levels, Heritage is trading at a discount when compared to its peers and we expect this to change as the management team continues to execute. If you are interested in learning more about Heritage Cannabis, please send an email to firstname.lastname@example.org with the subject “Heritage Cannabis” to be added to our list.
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This article contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs regarding future performance are “forward-looking statements”. Forward-looking statements can be identified by the use of words such as “expects”, “does not expect”, “is expected”, “believes”, “intends”, “anticipates”, “does not anticipate”, “believes” or variations of these words, expressions or statements, that certain actions, events or results “may”, “could”, “would”, “might” or “will be” taken, will occur or will be realized. Such forward-looking statements involve risks, uncertainties and other known and unknown factors that could cause actual results, events or developments to differ materially from the results, events or developments expected and expressed or implied in such forward-looking statements. These risks and uncertainties include, but are not limited to, dependence on obtaining and maintaining regulatory approvals, including the acquisition and renewal of federal, provincial, state, municipal, local or other licenses, and any inability to obtain all necessary government authorizations, licenses and permits to operate and expand the Company’s facilities; regulatory or policy changes such as changes in applicable laws and regulations, including federal, state and provincial legalization, due to fluctuations in public opinion, industry perception of integrative mental health, including the use of psychedelic-assisted therapy, delays or inefficiencies or any other reason; any other factor or development likely to hamper the growth of the market; the Company’s limited operating and profitability track record; dependence on management; the Company’s need for additional financing and the effects of financial market conditions and other factors on the availability of capital; competition, including that of more established and better funded competitors; the impact of the Russia-Ukraine conflict on the global economy; the continued impact of the COVID-19 pandemic; and the need to build and maintain alliances and partnerships, including with research and development companies, customers and suppliers. These factors should be carefully considered, and readers are cautioned not to place undue reliance on forward-looking statements. Despite the Company’s efforts to identify the main risk factors that could cause actual measures, events or results to differ materially from those described in forward-looking statements, other risk factors may cause measures, events or developments to materially differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. The Company does not undertake to revise forward-looking statements, even if new information becomes available as a result of future events, new facts or any other reason, except as required by applicable laws