The California cannabis opportunity represents one of the most exciting growth opportunities for companies focused on the burgeoning cannabis industry and this has been a market we have been closely monitoring.
California is the world’s largest cannabis market and we have been favorable on this multi-billion-dollar opportunity. During the last year, we have seen an increase in the number of companies focused on this rapidly growing market and this is something we continue to monitor.
When looking at the California cannabis opportunity, it is important to focus on companies that are fully licensed and that comply with state regulations. Next Green Wave Holdings (NGW.CN) (NXGWF) is a fully licensed California cannabis company that we have been monitoring closely and are favorable on.
A Fully Licensed California Cannabis Company
The California cannabis market represents a massive opportunity Next Green Wave is fully licensed and is in the middle of a major expansion. The company is focused constructing state-of-the-art facilities for cultivation, nursery/breeding, extraction and distribution and we are monitoring this process.
Next Green Wave’s business is completely integrated, which allows the company to control the complete seed-to-sale process. The company is constructing two indoor facilities that have approx. 85,000 sq. ft. for cultivation and plans to increase production capacity at the facilities to 350,000 sq. ft. This will make Next Green Wave one of the largest cultivators in California and we are bullish on the growth prospects as a result of this.
Once construction is complete, Next Green Wave will producing a significant amount of cannabis and is levered to a market where cannabis is in high demand. When it comes to distribution, the company is well position and plans to sell its products throughout the state and contract high quality licensed producers and processors that do not have a distribution license to package, market, transport and sell their respective products through its wholesale and retail network.
The fact that Next Green Wave is a fully licensed cannabis company provides it with a competitive advantage and we are favorable on this aspect of the story. The company has fully funded its current expansion and is led by a management team with a proven track record of success. Next Green Wave is well capitalized and well positioned to execute and this is an opportunity to be watching.
Secures a Strategic Partner to Support Growth
Last month, Next Green Wave secured another strategic partner and entered into a licensing agreement with Intrexon Corporation (NASDAQ: XON), a leader in the engineering and industrialization of biology to improve the quality of life and health of the planet. This was a significant development and we believe that this relationship could prove to be a major vale driver for the California cannabis company.
Under the agreement, Next Green Wave will utilize Intrexon’s Botticelli next generation plant propagation platform to enable rapid production of Next Green Wave’s proprietary cannabis cultivars for the California market. This represents a significant opportunity for the company and we will monitor how the teams execute on this.
According to the agreement, Intrexon will be entitled to royalties on Next Green Wave’s own plantlet usage and the parties will equally share the revenues from third party sales. Each company brings specific skills to this relationship and we are favorable on the growth prospects as a result of this agreement.
Intrexon’s Botticelli platform is an advanced tissue culture technology designed to enable efficient propagation of plants while maintaining genetic purity and product performance. When applied to cannabis, Botticelli offers potential for a sustainable, scalable, and more economical solution than conventional clones. Current cannabis cultivation is predominantly dependent on clonal propagation, which creates barriers to meeting product demand and is not sustainable due to risk of disease susceptibility.
The collaborative work conducted at Next Green Wave’s facilities will also accelerate its vision of becoming a world-class nursery. The collaboration between the companies will be two-staged and we are favorable on this opportunity. The two phases will be
- An optimization phase in which Intrexon will calibrate Intrexon’s Botticelli technology to Next Green Wave’s specific cannabis cultivars
- A production phase in which Next Green Wave may utilize the technology in: (i) the production of cannabis plantlets for its downstream products and (ii) the sale of plantlets to third party producers in California.
Next Green Wave initially will deploy Intrexon’s Botticelli platform within its Coalinga facility for the California market and will be responsible for maintaining appropriate licensure at the facility. We will monitor how this process goes and will keep an eye on how this relationship adds value to the entire Next Green Wave business.
A Company Worth Watching
Although Next Green Wave has significant advanced its fundamental story, the shares have come well off its late 2018 highs and this is an opportunity we are closely monitoring. The company is in the middle of a major expansion and has been executing on its previously announced initiatives.
Next Green Wave is focused on the high-growth verticals of the cannabis industry and is well positioned to capitalize on these opportunities. During the last month, the shares have come well off its lows and momentum has been trending higher. We believe that the market under-appreciates this growth opportunity and the company’s valuation is attractive, especially when compared to its peers. Next Green Wave has significant catalysts for growth and this is an opportunity worth watching.
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