Producers (LPs) have been trending higher and have been coming off its December lows. We have been monitoring this trend after highlighting several Canadian LPs that were under significant pressure in late December and will be keeping an eye on how these stocks trade from here.
One of the companies that we highlighted was The Green Organic Dutchman (TGOD.TO) (TGODF), a leading organic Canadian cannabis producer. We have been following The Green Organic Dutchman since inception and have been monitoring how the team continues to execute on previously announced initiatives. TGOD has moved significantly off its Dec 27th lows of $2.19 to upwards of $4.00, showing investors are pouring dollars back into the company.
Earlier this year, Aurora Cannabis (ACB.TO) (ACB) announced that it would acquire Whistler Medical Marijuana Corporation (Whistler), a private organic licensed Canadian cannabis producer. This was an expensive acquisition and Aurora will issue $175 million of common stock to a company that will be able to produce 5,000 kilograms per year, once its expansion is complete. If you do the math, Aurora is paying $35,000 per kilogram of organic cannabis and this represents a significant premium when compared to non-organic cannabis producers. Applying this valuation metric to TGOD on 170,000 kgs, you end up with a valuation close to $6 billion dollars or over $22 a share.
One of the reasons why Aurora paid a significant premium for the organic cannabis producer is due to the better margins associated with organic cannabis. This acquisition was significant for The Green Organic Dutchman for a number of reasons and it is a testament to the importance and the value of organic cannabis.
During the last month, The Green Organic Dutchman has come well off its lows and we continue to closely monitor the shares. Today, we have issued an update on the organic cannabis producer and believe that this is a company worth watching.
HemPoland Significantly Increases Production Capacity
Last year, The Green Organic Dutchman acquired HemPoland, a leading European manufacturer and marketer of premium organic CBD oils. This acquisition provides an easy way for the company to expand into new markets in Europe and is immediately accretive. HemPoland was the first company in Poland to obtain a state license allowing the company to grow hemp and manufacture CBD oil products.
We are favorable on HemPoland and expect this acquisition to be a major value driver in 2019. Last week, The Green Organic Dutchman updated its corporate website to reflect an increase in HemPoland’s production capacity. The increase was significant and now, HemPoland will be able to produce 91,000 kgs of organic hemp on an annual basis. Previously, the company was able to produce approx. 32,000 kgs of organic hemp and this increase is significant.
HemPoland provides The Green Organic Dutchman with a European gateway with distribution channels to over 750 million people and sales in over 700 locations across 13 countries. The company is vertically integrated, with over 1,250 acres of cultivation leveraging third parties, multiple commercial scale extraction units, and local distributors in Poland, Austria, Netherlands, Germany, United Kingdom, Italy, Switzerland, Portugal, Ireland, Czech Republic, Slovenia, Lithuania, and Estonia. This is a massive acquisition that significantly enhances the company’s presence in Europe and provides an easy route for expansion
Finalizes Definitive Agreement with Knud Jepsen
During the summer, The Green Organic Dutchman first entered the European market by signing a letter of intent for a 50/50 joint venture with Queen Genetics/Knud Jepsen A/S based in Denmark.
Last week, the companies signed a definitive agreement to establish two 50/50 joint ventures. The first joint venture will be for the purpose of producing commercial cannabis and cannabis oils and the second joint venture will be for developing and patenting innovative and commercially valuable elite cannabis genetics. The companies will form both joint ventures in Denmark with a goal of expanding the first joint venture into future low-cost European jurisdictions.
The agreement outlines the launch of a premium organic European bulk cannabinoid production platform where The Green Organic Dutchman will have the exclusive right to all cannabis-related production from the joint venture, through a guaranteed offtake agreement at a pre-determined price relative to the production cost. Further, the first joint venture will have exclusive access to all intellectual property including elite cannabis genetics developed by the second joint venture.
This will provide The Green Organic Dutchman with a consistent supply of high-quality organic cannabis grown in Europe, ready for the local European markets. The company’s differentiated approach to organic cannabinoid production combined with Knud Jepsen’s large-scale commercial horticultural and globally integrated seed-to-sale operations will accelerate the cannabis producer’s global initiatives. The European bulk cannabinoid production platform paired with the Genetics joint venture will generate value-added formulations and products for established European and international sales and distribution channels.
The European cannabis opportunity is significant, and The Green Organic Dutchman has made significant strides when it comes to this burgeoning market. We think Knud Jepsen represents a strategic partner and will monitor how this relationship drives values and how the companies execute from here.
Potentially Secures Exclusive Cannabis License in Greece
Last week, The Greek Ministry of Agriculture released a press release stating the Green Organic Dutchman is making a $74 million-euro investment into the country. It appears TGOD is well underway with licenses pending from the Greek Government after nearly a year of discussions. This is a significant development that enhances the company’s leverage to the European cannabis opportunity, and we will monitor how the team executes on this. This project is expected to commence construction in 2019 and could prove to be a massive value driver.
The discussion comes after Deputy Minister of Rural Development and Food Mr. Vassilios Kokkalis met with Marco Anastasiadis, CEO of The Green Organic Dutchman subsidiary, TGOD Hellas. According to the agreement, the Canadian organic cannabis producer plans to invest significant capital in the country and construct a state-of-the art cannabis production facility.
The Green Organic Dutchman is planning to construct a massive cannabis cultivation facility in several phases on a 34-acre parcel of land in the Thebes area. The facilities will be constructed according to the GACP and eGMP standards and the company and will follow the same organic farming protocols.
The Green Organic Dutchman plans to engage in partnerships with Greek Universities to fund scientific research, aiming to make Greece a World Innovation Center for cannabinoid-based medicines. We are favorable on the continued execution and the focus on the international opportunity and will keep an eye on this.
A Leading Organic Cannabis Opportunity
During the last year, The Green Organic Dutchman has been nothing short of an execution story and has been working tirelessly to expand their global operations. The company has significant catalysts for growth. This is an opportunity investors need to be watching.
Although many Canadian cannabis producers are in the middle of massive expansions, there will not be enough organic cannabis hitting the market and this will make it easy for a company like The Green Organic Dutchman to get shelf space and secure supply agreements.
The Green Organic Dutchman represents a differentiated opportunity and is led by a management with a proven track record of success. The company is well capitalized and well positioned to execute on a global growth strategy. If you want to learn more about The Green Organic Dutchman, please contact firstname.lastname@example.org