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Investors Are California Dreaming With These 4 Industry Leaders

Feb 23, 2018 • 11:40 AM GMT+0000
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6 MIN READ  •  By Michael Berger
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California’s legal cannabis industry continues to impress investors, and many are looking for investment opportunities levered to this burgeoning market. 

Demand for legal marijuana in California has exceeded expectations and many distributors are out of product. What we are seeing is something similar to what we have seen in Nevada, but on a much larger scale.

We are very bullish on the California cannabis market and expect it to be one of, if not the largest in the world. The companies levered to this rapidly growing market are well positioned to capitalize on growth opportunities and today, we highlighted four companies levered to it.  

High Hampton: A California Cannabis Stock

High Hampton (CSE: HC) (HHPHF) is focused on becoming one of the leading global distributors of cannabis products. The company is focused on increasing market share in California through a variety of strategic initiatives and agreements (i.e. equity, royalty, and direct property ownership with leasing agreements).

High Hampton benefits from a multi-faceted growth strategy and engages in finance, real estate, licensing, distribution, branding, and operations within the legal cannabis industry. The company offers an attractive platform since its integrated vertical supply chain improves margins by lowering the cost of goods sold and operating costs of brands and operators.

The company owns a 10.8 acre property in Coachella, California and is pursuing Conditional Use Permits (CUP) for cultivation and manufacturing (submitted applications in the fourth quarter of 2017). High Hampton acquired the strategic property for less than $2 million and if the company is granted a CUP, it would significant increase the property value (comparable properties cost approx. $5.5 million).

We are favorable on the company’s opportunity to be granted a license as High Hampton has engaged strategic partners to ensure that the buildout is executed flawlessly.  This represents an attractive opportunity for investors as the issuance of a CUP would be a catalyst for the company.  

We are bullish on the company’s growth strategy and focus on the California cannabis market. High Hampton is focused on increasing market share in California and we think this an attractive aspect of the story. We will monitor how the company continues to execute and keep you updated on important developments.

Sunniva: An Attractive Operating Structure

Sunniva (SNN.CN) is a vertically integrated medical cannabis company levered to the burgeoning medical marijuana markets in Canada and California. The company is comprised of three distinct divisions which can create value for each other as well as improve the value proposition of the entire company.

Sunniva’s three divisions are focused on cannabis production through Sunniva Current Good Manufacturing Practice standards (cGMP) Greenhouse (Canada and California), patient education through Natural Health Services (Canada), and best-in-class therapeutic delivery devices through Vapor Connoisseur (North America).

In October, Sunniva recorded a milestone and was granted a Conditional Use Permit for its California facility. The following month, the company broke ground on the California designed cGMP campus which will have a dispensary on-site and is expected to be operational by the third quarter of 2018. This facility is going to be massive and will be completed in two phases. Phase One includes the construction of a 325,000 sq. ft. facility, comprised of eight 22,000 sq. ft. flower rooms. Phase two will be 165,000 sq. ft. facility, comprised of eight 10,000 sq. ft. flower rooms.

Sunniva has taken a very strategic and profitable approach to the California facility. The company expects 50% of the facility cultivation to be initially manufactured into higher margin extracted products. The company is currently negotiating letters of intent with distribution networks and are negotiating long-term supply contracts with brands for private label services.

Sunniva is one of the only companies levered to both the California and Canadian marijuana market and we are very excited by this leverage. We will keep an eye on how the shares continue to trade and investors want to keep this company on their radar.

Phivida Trends Higher After Issuing Significant Corporate Update

Earlier this week, Phivida Holdings Inc. (VIDA.CN) (PHVAF) issued a corporate update for the first quarter of fiscal 2018 and we are favorable on this announcement. From a significantly stronger balance sheet to several major growth initiatives, this update provided visibility into some of the work Phivida is doing and the catalysts its faces.

Over the last year, Phivida has significantly increased its market share and we anticipate continued success. The company has significantly increased its reach in California via distribution agreements and we are very bullish on this opportunity. Phivida also signed a distribution agreement in Japan which is part of global expansion strategy and Phivida will have an early mover advantage in the Asian Pacific market.

Phivida provides investors with a differentiated opportunity and we are favorable on the company’s ability to capitalize on a multi-billion-dollar market. As the legal cannabis market continues to expand, companies like Phivida will be well-positioned to benefit from such growth. try.

We are bullish on the recent developments and investors looking for an opportunity levered to several major markets should take a look at Phivida. The shares have come well off its recent highs and we are favorable on the company due to the continued execution, the improving fundamentals, the attractive leverage to several of the largest markets, and the current valuation.

FinCanna: Improves Its California Cannabis Portfolio

Over the last few months, we have highlighted FinCanna Capital Corp. (CSE: CALI) (FNNZF) as an attractive company levered to the California licensed medical cannabis market. The company is focused on executing its “royalty model” business plan and is building a portfolio of investments in scalable best-in-class projects.

FinCanna’s flagship investment is in Cultivation Technologies Inc.’s (CTI) which plans to construct an indoor medical cannabis facility to be developed on a six-acre site in Coachella, California. The Coachella Campus is designed to be a 111,500 sq. ft. state-of-the-art facility that will include cultivation, extraction, manufacturing, testing and distribution.

Last week, FinCanna signed a binding term sheet with Gram Co Holdings, a cannabinoid research and refinement facility focused on providing products and services to licensed medical dispensaries, infused product manufacturers and other California cannabis businesses.  

Gram Co plans to be a premier producer of bulk quantities of THC distillate and various concentrates produced via hydrocarbon-based solvent extraction. Gram Co also plans to provide white labeling services to licensed brand and infused product manufacturers who do not have direct access to compliant production facilities.

Gram Co has leased a facility in Oakland, California in which they are retrofitting a large, state-of-the-art medical cannabis extraction laboratory, which is expected to be operating by the end of the third quarter of 2018. 

Earlier this week, FinCanna announced plans to complete a $5 million non-brokered private placement and we are favorable on the recent developments. We consider the cannabis oil opportunity in California to be one of the most attractive opportunities and are bullish on the leverage provided through Gram Co.

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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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