The summer has been relatively good for a few pot companies making progress in production and expansion. But this could be their best season yet.
Of course Canada’s first-mover Cannabis companies are taking the lead and seeing first fruits including MYM Nutraceuticals Inc. (OTC:MYMMF) (CNSX:MYM.CN), Aurora Cannabis (OTC:ACBFF) (TSX:ACB.TO), Aphria Inc. (OTC:APHQF) (TSX:APH.TO), and MedReleaf Corp. (OTC:MEDFF).
This situation is further fuelled by Prime Minister Justin Trudeau’s efforts to fulfill his campaign promise to legalize recreational use of marijuana in the Great White North. His goal is for recreational marijuana to be available in Canada by July 1, 2018.
That mandate is setting the stage for some very big things.
Markets are aware of the trend and rewarding companies that show the ability to make key operational advances and show solid revenue growth while keeping costs in hand.
These companies include Aurora Cannabis (OTCQX:ACBFF) (TSX:ACB-TO.TO), Aphria Inc. (OTCQB:APHQF) (TSX:APH-TO.TO) and MedReleaf Corp. (OTC:MEDFF).
All three of these companies are licensed medical marijuana providers in Canada and each has reported improving financial results.
Another early LP company worth mention is MYM Nutraceuticals Inc. (OTCQB:MYMMF) (CNSX:MYM-CN.CN), a newcomer to the group that is gaining attention for its announced development of one of the world’s largest cannabis greenhouses expected to dwarf all others.
These participants all fall into the Licensed Producer (LP) category with the government sanctioned authority to produce and process cannabis.
HOW BIG IS BIG?
The cannabis market is showing major room for growth and strong profits.
Professional services firm Deloitte expects that the annual retail marijuana market in Canada could be at least $4.9 billion and perhaps as high as $8.7 billion. Most reviewers expect that it will surpass Canada’s legal alcohol market valued at $22.1 billion last year.
But the three largest current suppliers of medical marijuana in Canada have a combined annual revenue of less than $100 million at present. Getting from here to the projected $4.9 billion (or $8.7 billion) mark is going to require phenomenal growth and expansion, especially by the leaders in production.
According to a new report by Arcview Market Research, the North American marijuana sales grew by an unprecedented 30% in 2016 to $6.7 billion as the legal market expands in the U.S. and Canada.
The market for the Cannabis derivative, CBD alone hit $170 million in 2016 and is projected to grow $1 billion by 2020.
The potential $22.6 billion cannabis industry is still in its infancy, and for investors there seems to be no limit on the potential value this sector can offer.
THE GROWTH CURVE
In the early stages, producers began with simple greenhouse facilities and growing operations. With the hyper growth in demand for more and high quality cannabis, the momentum has shifted and it’s a race to build new, larger facilities with better yields of higher quality pot.
The current largest facility is a 350,000 square feet of greenhouse space in Ontario by the leader in growing, Canopy Growth.
Aurora Cannabis is hard at work on its massive 800,000 square feet of growing space in the town of Leduc, Alberta, near the Edmonton Airport.
AmeriCann Inc. is planning to surpass Aurora’s new facility with the largest cannabis greenhouse operation in the US at roughly 1 million square feet to be located in Massachusetts.
Not to be outdone, is MYM Nutraceuticals has announced its plans to build a 1.5 million-square-foot cannabis production facility consisting of fifteen 100,000-square-foot-greenhouses.
Operations at this scale will certainly give the industry a new leaf on production. They will need it in order to keep pace with demand.
MYM MOVING UP
MYM Nutraceuticals is an interesting junior on the move.
The company and its majority-owned subsidiary CannCanada signed an exclusive deal with the Quebec municipality of Weedon to build its 1.5 million square foot facility in 2016.
The Weedon community views its efforts as a means to create jobs and foster an entire industry in the process. To show its commitment, the town of Weedon itself is acquiring the 329 acres of land for MYM to establish its mega facilities.
This is a considerable benefit for MYM Nutraceuticals.
While it is being built in 4 phases, the Weedon marijuana operation will ultimately be one of the largest grow operations on the planet. MYM expects that it can produce over 150,000 kg of cannabis per year there.
MYM also announced another smaller production facility that it expects to have online in Laval, Quebec by the end of the fourth quarter of 2017.
Along with growing and cultivation at Laval and Weedon, MYM is pretty diversified. The company is advancing formulation and production to support its branding and distribution. Its cannabis-based brands include Joshua Tree, MyHemp Skin Therapy, and HempMed offerings.
That’s a serious effort for a smaller company.
It’s also interesting when contrasted against the bigger players; Aphria trades at more than 40 times sales, Aurora Cannabis trades at over 67 times sales and the leader, Canopy Growth trades 34 times sales. Huge expectations for growth are already priced into the valuations of each of these companies.
MYM Nutraceuticals is still in the very early stages, but its share price reflects that, which might make it the most attractive of all.
As a model, Canadian pot companies appear to be setting the standard with quick sales growth, falling growth costs, and improving financials. It is apparent that companies building capacity, expanding rapidly and managing brand and distribution could get the most mileage out of what looks like marijuana’s best season ahead.
Aurora Cannabis (OTCQX:ACBFF) (TSX:ACB-TO.TO)
Through its wholly-owned subsidiary, Aurora Cannabis Enterprises Inc., Aurora Cannabis is a major LP, operating a 55,200 square foot, state-of-the-art production facility in Mountain View County, Alberta. Aurora made waves when it announced the construction of its 800,000 square foot ‘Aurora Sky’ facility second 800,000 square foot production facility at the Edmonton International Airport. Aurora’s also involved in Quebec, with its third 40,000 square foot production facility set to be completed in Pointe-Claire, Quebec, on Montreal’s West Island. Aurora also holds a minority stake in leading extraction technology company Radient Technologies Inc., based in Edmonton, and a minority stake in Australian company Cann Group Limited, which was the first in Australia to conduct research on and cultivate medical cannabis. Aurora also owns German wholesale importer, exporter, and EU medical cannabis distributor Pedanios.
Aphria (OTCQB:APHQF) (TSX:APH-TO.TO)
Aphria Inc., boasts itself as one of Canada’s lowest cost producers, that produces, supplies and sells medical cannabis. Located in the greenhouse capital of Canada, Leamington, Ontario, Aphria provides pharma-grade medical cannabis, and quality patient care. Aphria was the first public LP to report positive cash flow from operations, and the first to report positive earnings in consecutive quarters.
MedReleaf Corp. (OTC:MEDFF)
MedReleaf sets The Medical Grade Standard for cannabis in Canada and around the world. The first and only ISO 9001 certified cannabis producer in North America, MedReleaf is a R&D-driven company dedicated to patient care, scientific innovation, research and advancing the understanding of the therapeutic benefits of cannabis. Sourced from around the world and perfected in one of two state of the art facilities in Ontario, MedReleaf delivers a variety of premium products to patients seeking safe, consistent and effective medical cannabis.
For a more in-depth look into MYM you can view the in-depth report at USA News Group: http://usanewsgroup.com/2017/09/11/biotech-sector-poised-to-deliver-more-health-and-wealth-2-2-2
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