Although the United States cannabis industry has been generating considerable traction, there are a number of companies that are flying under the radar and have significant leverage to some of the most attractive opportunities in this market.
We are especially favorable on the California market, which is the world’s largest cannabis market and we have been closely monitoring this burgeoning opportunity. From retail dispensary operations to leading cannabis brands, there are considerably more cannabis investment opportunities available to investors than there were at this time last year and this is a trend that we are watching.
Today, we want to highlight a California cannabis company that represents a multi-faceted growth opportunity that has been flying under the radar. The company, High Hampton Holdings (HC.CN) (HHPHF) is trading at an attractive valuation when compared to its peers, has attractive growth prospects, and has several potential catalysts for growth.
Continues to Gain Momentum and Advance its Story
Last month, High Hampton was able to gain momentum after it announced an evolution of its strategy to properly align with the dynamic legal cannabis market in California. Based on the initial response from the market in regard to this new strategy, we believe this is an important initiative for High Hampton and will monitor how the team executes on this opportunity.
2018 was a significant year for High Hampton and the company made several significant acquisitions and investments during this time. The new strategy fully leverages these acquisitions and investments, allowing High Hampton to become one of the few truly vertically integrated companies in California. As a result, the new strategy leaves High Hampton well positioned to fully execute on the brands and distribution assets that make up its investment portfolio.
The new vision takes a brand forward approach, whereby High Hampton will focus on four key strategy elements:
- Own and operate the processes that allow the company to manufacture, infuse, and package high quality, branded products for the recreational and medical markets.
- Own and operate the paths to market for branded products through its distribution capabilities in the state’s most lucrative markets in Northern and Southern California.
- Take advantage of the valuable data and insights collected through distribution to understand market needs and solve the needs through the introduction of new products and brands that will be produced by its California manufacturing businesses.
- Control its supply chain, starting with product-focused strains in its Los Angeles (Cudahy) nursery and continuing through the cultivation cycle.
High Hampton represents a multi-faceted growth opportunity and we are favorable on this new strategy. We expect this new strategy to enhance operations, increase margins, and take the company down the path of profitability. The California cannabis market represents a multi-billion-dollar opportunity and we expect to see significant value created as a result of this new direction.
Growing Through Inorganic and Organic Growth Projects
Through a series of inorganic and organic growth initiatives, High Hampton has been able to significantly advance its fundamental story and we are bullish on how these acquisitions have been able to position the company for success. We will monitor how the team is able to position these assets to benefit the overall business and believe that this is something that investors need to be watching.
In late 2018, High Hampton completed the acquisition of Mojave Jane, a licensed manufacturer of premium cannabis extracts and concentrates for the California market. Mojave Jane provides High Hampton with leverage to the smokeless cannabis product market, which we consider to be one of the most attractive verticals in the cannabis industry due to the increasing demand for these products as well as the more attractive economics (has a higher price point and higher profit margins).
Mojave Jane is licensed for both volatile and non-volatile manufacturing and currently utilizes state-of-the-art CO2 extraction technologies and proven distillation techniques to create products for both the recreational and medical cannabis market. We believe that this acquisition will result in the addition of near-term revenue and will create countless synergies within High Hampton’s growing portfolio of California -based cannabis manufacturers and distributors.
In July 2018, High Hampton made its initial move into the smokeless product market and completed the acquisition of HS Airway Holding, a California company that owns the CALIGOLD Edibles brand. CALIGOLD represents a significant acquisition and adds a well-established and recognized edibles brand to the company’s portfolio of products. The edibles brands represents a significant growth opportunity and has 7 multi-strain flavored award-winning chocolate bars in dispensaries across California, as well as cannabis concentrate products (Live Resin, CBD Sauce and Sugar).
CALIGOLD is a well-known brand that enhances High Hampton’s product portfolio and we expect the CALIGOLD product line to generate significant traction through High Hampton’s distribution platform. This improves the company’s leverage to the California edibles market and we believe that this something worth watching.
Last year, High Hampton enhanced its California distribution network with the acquisition of 420 Realty, which has applied for multiple permits to vertically integrate in the Greater Los Angeles Area, for a development agreement including cannabis cultivation, nursery, manufacturing, delivery, and distribution licenses on a single location.
Earlier this year, 420 Realty LLC received six California State cannabis licenses to operate at its facility located in the City of Cudahy. This comes one month after the City of Cudahy officially executed the Development Agreement (DA) with 420 Realty which granted full local authority to develop the property and conduct cannabis business operations under the conditions set forth in the development agreement.
With the development agreement and temporary licenses in hand, High Hampton can commence the development of the facility in Cudahy, which is a key part of High Hampton’s strategy to serve the Southern California market. This was as significant development and the facility represents a strategic location for High Hampton to take its brands into the Southern California market.
A Growth Story to be Watching
The California cannabis market represents an exciting opportunity and we are bullish on High Hampton’s leverage to this market. The company has made several significant acquisitions that have enhanced its position in the California market and this is an important aspect of the story. Going forward, High Hampton has several significant potential catalysts for growth and we think the market under-appreciates this.
Although High Hampton has come well off its recent lows, the shares are trading at a significant discount to its peers and we think this makes the company a compelling opportunity. High Hampton has been able to use its stock as a currency to make acquisitions which has enhanced growth prospects and we are favorable on the new leadership at the company.
We think that High Hampton found its low in December and believe that the change in management team put unnecessary pressure on the shares. High Hampton is in the early innings of a major growth cycle and this is something to watch.
Pursuant to an agreement between StoneBridge Partners LLC and High Hampton Holdings Inc. we have been hired for a period of 360 days beginning February 1, 2018 and ending February 1, 2019 to publicly disseminate information about (HC) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month for a period of 12 months. We own zero shares of (HC), which we purchased in the open market. We plan to sell the “ZERO” shares of (HC) 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 (HC) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information. This contract has been renewed for an additional 180 days expiring on August 1, 2019.