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Indiva Is An Under-appreciated Opportunity with Significant Upside Potential

Jun 5, 2018 • 10:54 AM EDT
Canada Stocks (51).png
3 MIN READ  •  By Michael Berger
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Over the last year, we have highlighted Indiva Limited (NDVA.V) (RMKXD) as a Canadian cannabis stock to watch and the recent developments has made this a company that investors need to keep an eye on.

Although Indiva has continued to execute, the shares have been trending lower and have recorded a double digit percentage decline during the last quarter. This weakness has created an opportunity for new and existing investors and today we have issued an update on the company.

Signs Strategic Agreement with DeepCell Industries

In late April, Indiva signed an exclusive license agreement with DeepCell Industries and invested $1.5 million investment into the Seattle based technology development company that is focused on material science, microfluidics and cannabinoid molecule discoveries. DeepCell commercializes products by licensing its technology and trademarks to licensees with appropriate cannabis production and distribution licenses.

Under the agreement, Indiva acquired exclusive rights to manufacture and sell DeepCell’s complete line of products in Canada, including its cannabis infused Ruby products which were produced using patented Crystal Fusion technology. The technology mechanically fuses cannabinoids with sugar or salt, creating crystals that are both water soluble and stable. The Ruby product line consists of infused sugar and salt crystals, pancake and drinks mixes, candies, topicals, prebiotic supplements and isolates.

In return for the $1.5 million, Indiva acquired approximately 15% of DeepCell, which allows the company to continue developing innovative products to license to partners in California and other jurisdictions permitted under applicable law.

Announces Strategic Joint Venture and Investment in Bhang Corp.

Earlier in April, Indiva reported a 50/50 joint venture with Bhang Corporation and invested $1 into the licensor of cannabis and CBD edibles and concentrates. In return for the $1 million, Indiva received a 4.9% equity interest in Bhang. The joint venture is managed by Indiva and has exclusive rights to manufacture and sell Bhang products in Canada and the right to export those products internationally. Bhang is an intellectual property company which licenses rights to a full range of cannabis and CBD products, including chocolates, gums and oral sprays, isolates, vapes and vape cartridges and accessories.

The products produced through the JV are expected to be sold in Canada’s recreational marijuana market, which is expected to open later this year. This represents a significant opportunity for Indiva and we will monitor how the companies continue to execute on this opportunity.

Indiva has committed to investing $5 million in building cannabis processing infrastructure and Bhang is contributing its know-how and intellectual property, including its trademarks and patents, to the JV and will collaborate with Indiva on sales and marketing. Each of the parties has committed to contribute equally to the working capital of the JV. While we think Indiva is more levered to the success of this relationship due to the capital invested (as well as the capital it plans to invest), this opportunity is massive for Bhang and we expect to see the company deliver on its side of the deal.

An Underappreciated Opportunity with Significant Upside Potential

In 2018, Indiva has been under pressure and the shares have fallen more than 40% during this time. We think this sell-off is overdone and are favorable on the continued execution by the Canadian cannabis producer. Indiva is led by an experienced management team that is focused on creating value for its shareholders. The Canadian cannabis producer is focused on producing a premium product and is focused on becoming a global marijuana brand recognized for high quality cannabis products.

Indiva has several potential event driven catalysts in the pipeline and we are bullish on this opportunity. We are favorable on the fully funded growth initiatives, especially the planned expansion to 40,000 sq. ft. and is expected to be completed before the end of the year. These potential catalysts will represent significant milestones for the Canadian cannabis producer and we are favorable on the valuation and see upside to current levels.

The recent investments show that Indiva is committed to significantly expanding its product offering to capitalize on the Canadian recreational marijuana market, which is expected to open later this year. The company is in the early innings of a major growth cycle and this is a company that cannabis investors need to keep an eye on.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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