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After Canada’s Senate approved legislation to legalize recreational marijuana, cannabis stocks bounced higher. In recent days, the sector has given up a good portion of these gains and investors are monitoring the recent decline.
We have been monitoring the cannabis sector closely and came across a company that definitely merits highlighting. The company, RavenQuest Biomed Inc. (RQB.CN) (RVVQF) is an undervalued cannabis company with a unique story.
An Attractive and Differentiated Cannabis Producer
RavenQuest BioMed represents an attractive and differentiated Canadian cannabis company upon which investors need to keep an eye. When the company’s expansion plans are complete production capacity will reach approximately 51,000 kilograms annually. Existing properties have significant room to expand and we consider this to be a long-term growth driver for the company.
This Canadian cannabis producer is led by a management team with a proven track record of success and who are recognized leaders in the cannabis industry. This is an important aspect of the story and we are bullish on their ability to execute and create value for shareholders.
When compared to other Canadian cannabis producers, RavenQuest has a differentiated story and value proposition. The company has a multi-faceted growth strategy that helps de-risk the business plan. We are favorable on the valuation and this is a stock that we will continue to monitor.
A Growth Opportunity
RavenQuest is in the middle of a major expansion and will be well positioned to capitalize on an undersupplied Canadian cannabis market. In October, Canada’s recreational marijuana market will open and this will create a major supply-demand issue. RavenQuest expects to be producing approx. 11,00 kilograms on an annual basis by the end of the year and will be able to capitalize on a market shortage.
RavenQuest owns a several facilities that will provide several event-driven catalysts for the company. The facilities include the following:
- The Ontario facility, Bloomera, is 20,000 sq. ft. and can produce 2,200 kilograms a year. RavenQuest’s ultra-efficient, yield maximizing Orbital Gardens will be introduced in September increasing production to 4,000 kilograms a year.
- The Alberta Green Biotech facility is nearing completion and will be 35,500 sq. ft. Orbital Gardens are currently being installed in the facility which will produce 7,000 kilograms per year. The land package at AGB provides significant room to expand and we are monitoring the current buildout.
- RavenQuest first partnership with Indigenous Peoples is massive and will be able to produce approx. 50,000 kilograms a year. The company has a 30% interest in this property and we are favorable on this asset.
- The company signed an LOI for a 125,000 sq. ft. facility in BC which can produce 25,000 kilograms a year. This provides RavenQuest with a strategic asset on the west coast of Canada; we look forward the closing of this agreement.
A Differentiated Opportunity
Last year, RavenQuest signed an agreement with Fort McMurray First Nation #468 to build a 24,000 sq. ft. facility which will be rapidly expanded to 250,000 sq. ft, as mentioned above. We are favorable on this relationship and view it as an attractive growth driver for the company. Over the next year, we expect the company to secure agreements with other Indigenous nations which will create catalysts.
On top of the increased production capacity, the relationship with FMFN #468 adds a significant distribution network. We expect the agreement to open up new distribution outlets for RavenQuest and view this as an attractive aspect of the relationship.
RavenQuest is already generating revenue and producing positive cash flows through its services division. This division provides proprietary, automated systems for growing, drying and security monitoring to its clients and delivers comprehensive, integrated solutions to cannabis companies.
Earlier this year, RavenQuest BioMed announced a landmark research partnership with McGill University to research and develop methodologies behind cannabis plant stabilization and yield maximization. The work will be conducted through collaboration between two McGill laboratories and we are excited by this opportunity.
A Stock to Watch
RavenQuest has been able to raise capital and fund existing growth initiatives. The company has a significant shareholder base, and this is a testament to the company’s success. The current valuation is attractive and investors need to keep an eye on the company. With a leading management team, a strong balance sheet, valuable assets, and strategic relationships, RavenQuest is positioned to be a leader in Canada.
We are favorable on the continued execution and the growth opportunities. The valuation is attractive and we think this is a company that cannabis investors need to be monitoring.