Although 2020 was expected to be a banner year for the cannabis industry, expectations have not been met so far and this is a sector that we are closely watching. During the last month, several leading Canadian cannabis producers have reported quarterly financial results that have put additional pressure on the sector.
Despite the sector’s weak performance so far this year, we believe that there are pockets of opportunity in the cannabis sector. Selectivity is more important than ever in the Canadian cannabis industry and we continue to prefer attractively valued growth businesses that are executing on previously announced initiatives.
Namaste Technologies Inc. (TSXV:N) (NXTTF) is a Canadian cannabis company that we have been bullish on and is one that our readers should be aware of. During the last year, the Canadian cannabis company has been in the middle of a major transition and we are favorable on the evolution of the business. We believe that Namaste is led by a management team that has its finger on the pulse of the cannabis industry and understands the opportunities that are available for businesses.
We believe that Namaste represents a multi-faceted growth opportunity that has several potential catalysts for growth. One of the reasons we are excited about Namaste is related to the number of avenues that it has for growth and we are most excited about how CannMart, a wholly owned subsidiary of Namaste, has advanced. Through CannMart, the company has been capitalizing on the Canadian cannabis market and this is a trend that we expect will become more significant in the coming quarters.
Forms a Strategic Relationship with Ignite
Earlier this week, Namaste announced an important development with regard to CannMart and reported to have entered into a licensing agreement with Ignite International Brands, Ltd. (CSE:BILZ) (BILZF). The agreement grants CannMart a non-exclusive license to utilize certain Ignite brand trademarks on legal cannabis-based products in consideration for certain royalty payments.
Pursuant to the agreement, the companies will work together to source premium inputs, including flower and cannabis 2.0 offerings, from Canadian craft cannabis producers for the Ignite product line. Under the agreement, CannMart is responsible for all functions that are associated with the procurement, processing, and packaging of Ignite products in its Health Canada-licensed processing facility. CannMart will also oversee the sale and distribution of the Ignite products in Canada and we are bullish on the amount of value that can be generated through the agreement.
Ignite is a well-known cannabis brand in the US and the Namaste management team expects the product line to generate traction in the Canadian cannabis market. Going forward, CannMart intends to leverage Ignite’s brand recognition to drive sales throughout its B2B network of provincial agencies. We are favorable on the growth prospects associated with this relationship and expect the product line to gain traction and generate revenue in the Canadian market.
CannMart is an Important Growth Vertical for the Business
Through CannMart, Namaste is well positioned to capitalize on the changing landscape of the Canadian cannabis industry. The company has entered into agreements with several leading cannabis brands in order to capitalize on the Canadian cannabis market and we are favorable on this focus of the business. Over the next year, we expect Namaste to expand its revenue growth through multiple offerings, serving as a significant catalyst for the business.
We believe that Namaste is in the middle a major transition and are of the opinion that the market does not fully appreciate this aspect of the story. With approx. $ 49 million of cash on the balance sheet as of August 31, 2019, the company is well positioned to take advantage of unique growth opportunities and we will monitor how the story continues to advance.
At current levels, Namaste appears to be a compelling opportunity and we base this off of simple valuation metrics. If you were to analyze the company on a comparative basis, you will notice that it is trading at a substantial discount to its peers and we find this to be significant. Namaste is a company that has significant catalysts for growth and is an opportunity that we are excited about.
If you are interested in learning more about Namaste Technologies, please send an email to firstname.lastname@example.org to be added to our distribution list.
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