The last few months have been a weak period for the cannabis sector with now being an opportune time to start putting companies on your radar. During the last month, we have been focusing on companies that have visible and attractive growth prospects.
Jushi Holdings Inc. (NEO: JUSH.B) which is focused on the US cannabis opportunity and is executing on a coast-to-coast expansion strategy. Jushi has a strong management team with a focus on key strategic US cannabis and hemp markets.
A few weeks ago, Jushi completed the acquisition of Franklin Bioscience – Penn LLC as well as its subsidiaries Franklin Bioscience – NE, LLC, Franklin Bioscience – SE, LLC and Franklin Bioscience – SW, LLC which together hold one Phase I and three Phase II dispensary permits that allow for the opening of 12 medical marijuana dispensaries in Pennsylvania.
When analyzing the landscape of the US cannabis market, it is impossible to ignore Jushi’s footprint in Pennsylvania. When you compare Pennsylvania to California or Colorado, there are two significant differences. Recreational cannabis is not legal in Pennsylvania like it is in California and Colorado and Pennsylvania issues a limited number of licenses.
Pennsylvania represents an attractive cannabis destination for licensed operators due to the limited license nature of the market as well as the size of the population. With a population of 13 million, the state is the fifth largest in the US and approximately one-third the size of Canada. Currently, there are fewer than 50 operational dispensaries in Pennsylvania and is expected to top out at 150. We like these two factors of the Pennsylvania market and we hope to see Jushi make a major splash in this market.
In 2018, the first year that Pennsylvania’s medical cannabis market was operational, the state generated more than $130 million in total sales, and is expected to generate more than $360 million by 2022 (according to Arcview Market Research). Given the macro-economic factors, there are growth prospects associated with Pennsylvania’s emerging cannabis industry and Jushi has the opportunity to become a major medical dispensary retail operator in this northeastern cannabis market.
Through this acquisition, Jushi will own four medical cannabis dispensary entities, with each entity being allowed to open three separate locations in each permit’s geographic locations (two in the Philadelphia area, one in the Scranton area, and one in the Pittsburg area). The existing retail dispensary brand has four operational dispensaries in Philadelphia, Bristol, Johnstown and Scranton with the fifth dispensary opening later this month. All of the dispensaries are strategically located near major interstate highways and key high-traffic areas. The locations of these entities are in the most densely populated areas of Pennsylvania. Three of the four permits allow for facilities in major metropolitan markets, Philadelphia and Pittsburgh, which together account for approximately 15% of the Pennsylvania’s total population. Additionally, Jushi has previously stated it has an LOI in place for an acquisition of another permitted entity, which if closed would result in a combined total of five permitted entities owned by Jushi, allowing for up to 15 dispensaries in the Commonwealth.
Jushi Makes a Splash in Virginia via Acquisition
Another significant development for Jushi that was announced last month was the signing of definitive agreements to acquire 62% of the membership interests in Dalitso LLC. This represents an exciting opportunity due to Dalitso being one of only five applicants to receive conditional approval for a permit issued by the Virginia Board of Pharmacy to cultivate and process medical cannabis, and to dispense and deliver CBD oil and THC-A oil extracts in the state.
Virginia is an emerging limited medical cannabis market. Ranking 12th in the US from a population standpoint. Dalitso’s conditional approval is for the northeast region of Virginia and Jushi hopes to catalyze Dalitso’s development of its facility in Prince William County, near the city of Manassas.
Dalitso has received conditional approval to operate within the Virginia Board of Pharmacy-designated Health Service Area II, which includes two of Virginia’s most densely populated counties, Fairfax and Prince William. According to World Population Review, Health Service Area II has a population of 2.4 million people and represent 28.2% of the state’s total population. Fairfax and Prince William make up about over 50% of the population in Health Service Area II.
Enters California via Acquisition of a Leading San Diego Operator and Key Permit Approval in Culver City
Concurrently with the Dalitso announcement, Jushi formally entered the California market through a definitive agreement to acquire 75% of an operational recreational and medical dispensary in San Diego. California is the largest state in the US and has a larger population than Canada.
San Diego represents a much different market when compared to the rest of California. San Diego is the second largest city in California with a population of approximately 1.4 million and over 35 million visitors each year. San Diego is also a limited license market with a maximum of 36 total retail cannabis licenses divided among 9 council districts. To date, 19 retail cannabis licenses have been issued in the city, 17 of which are operational.
Jushi has selected a strategic partner that is a proven operator in San Diego and has a loyal customer base and a premium product offering.
On the heels of the San Diego news and after an intensive vetting process, Jushi’s subsidiary was selected to move forward in the merit-based application process for a storefront retail (and ancillary delivery) permit in Culver City, California.
Of the 23 retail storefront applications submitted, Jushi’s subsidiary was chosen as one of only three to receive this approval. The company intends to build a ground-up structure approximately 500 feet away from Interstate 405 at the corner of Venice and Sepulveda Boulevards. The 3800 Sepulveda Boulevard location provides convenient access to the residents of Culver City and adjacent City of Los Angeles, a premier opportunity for retail and delivery operations.
Culver City is surrounded by the City of Los Angeles, centrally located on the West side near Santa Monica, Beverly Hills and the Los Angeles International Airport. Culver City is particularly known for its growing high-tech and creative economies, and a dynamic downtown that is regionally known as a destination for restaurants, live theater and art galleries.
A Hemp Leader in the Making
Jushi has also been strategically executing its vision when it comes to the hemp side of its business. Over the last year, Jushi, through Sound Wellness Holdings, Inc., has been working to expand its position in this market. Earlier this year, Sound Wellness launched a full spectrum CBD – hemp-derived product line.
According to New Frontier Data, the global hemp market reached $3.74 billion in retail sales in 2018 and the 2018 Farm Bill has already proven to be a major catalyst for the hemp and CBD industry. Furthermore, the global hemp market is expected to be a $5.73 billion market by 2020 (according to New Frontier Data).
Additionally, the company plans to construct a state-of-the-art hemp processing facility.
An Acquisition and Execution Story to be Watching
July has been a very busy month for Jushi. During the last year, the company has significantly advanced its fundamental story and enhanced growth prospects by executing on a series of inorganic and organic growth initiatives.
We will monitor how the management team is able to integrate the assets. We believe the management team is ahead of the curve when it comes to identifying leading cannabis brands and we are impressed with their continued execution.
To stay up to date with the leading US cannabis company, please reach out to firstname.lastname@example.org.
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