In November, we published an article highlighting Namaste Technologies (N.V) (NXTTF) and wanted to do a follow up piece as it relates to this opportunity.
A few weeks ago, Namaste reported quarterly financial results and received a mixed response from the market. When analyzing the financial results, the strength of the company’s balance sheet was a metric that stands out and we find this to be significant. At a time where cannabis companies have raised hundreds of millions of dollars and now reporting to be low on cash, Namaste has more than $49 million of cash on the balance sheet (as of August 31st ) and is well positioned to take advantage of organic and inorganic growth opportunities.
At current levels, Namaste is trading at ~2x cash and we believe that the market significantly under-appreciates the growth prospects associated with the Canadian cannabis company.
Namaste reported several major milestones last year and is run by a new management team. Although the company has changed over the last year, the market has been negative, and this is an opportunity that is worth highlighting.
Signs Major Deal With Premium Cannabis Brand House
Last week, Namaste announced a licensing and manufacturing agreement between its wholly owned subsidiary, CannMart, and TREC Brands. The companies will be focused on bringing high quality products to TREC’s brand conscious customer base under the WINK cannabis brand. This relationship is expected to generate an additional revenue stream for both companies and we are favorable on the expertise that each company brings to the partnership.
Namaste’s CannMart is introducing WINK Cannabis dried flower products into Saskatchewan with additional products and markets in the future. When we combine the premium cannabis brands that fall under the TREC umbrella, with CannMart’s distribution, you have a recipe for success, and we will monitor how the management team is able to drive this aspect of the story forward. The companies will be introducing premium cannabis brands in provinces across Canada and we are bullish on the growth prospects associated with this strategy.
TREC is an acronym that stands for Trust, Respect, Equality and Compassion. We believe that trust is of the utmost importance following the vaping health crisis and we find this to be significant. Going forward, we expect the cannabis consumer to much more careful with the products they consumer and expect the Namaste platform to be a beneficiary of this.
A Company with Catalysts for Growth
When we look at the growth prospects associated with Namaste, there is a lot to be excited about. The company’s CannMart subsidiary has been nothing short of an execution story and has substantial growth prospects as we head into 2020. Over the next year, we expect CannMart to report strong growth as it continues to capitalize on the Canadian cannabis market.
In late October, CannMart reported a major milestone and received approval from Health Canada for an amendment to its license allowing it to offer cannabis oil concentrates on its online marketplace. We expect to see strong demand for these high-margin cannabis products and expect the amendment in its licensure to quickly prove to be a catalyst for growth. The amendment allows CannMart to offer cannabis oils to its registered medical patients immediately and we expect to see new revenue showing up on a go forward basis.
The amendment will also allow CannMart to capitalize on the changing landscape of the Canadian cannabis market, especially as it relates to smokeless cannabis products (i.e. edibles, extracts, and topicals). In 2020, we expect CannMart to become a major player in this market as it continues to sign agreements with new B2B entities and believe that the market underestimates the magnitude of this opportunity.
Deloitte recently estimated that the Canadian edibles and alternative cannabis products market could be worth up to C$2.7 billion annually. This represents a significant opportunity and CannMart is well positioned to capitalize on this burgeoning vertical of the cannabis industry. We expect to see revenues ramp higher as a result of this and will monitor how this benefits the entire business.
At current levels, we find Namaste to have an attractive risk-reward profile and are favorable on the strength of the balance sheet. We believe that the recent weakness in the cannabis sector is transitory and will continue to closely monitor the Namaste opportunity. Going forward, we expect selectivity be more important than ever in the cannabis industry and believe that Namaste represents an attractive opportunity.
Pursuant to an agreement between StoneBridge Partners LLC and Namaste Technologies Inc. (N)(NXTTF) we have been hired for a period of 180 days beginning October 1, 2019 and ending April 1, 2020 to publicly disseminate information about (N)(NXTTF) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (N)(NXTTF) for or were paid “0” shares of restricted common shares. We own zero shares of (N)(NXTTF), which we purchased in the open market. We plan to sell the “ZERO” shares of (N)(NXTTF) 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 (N)(NXTTF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.