New York, New York (NetworkNewsWire) – While developments in
U.S. marijuana markets have no trouble attracting headlines, many
seasoned investors have discovered a more predictable method of
capitalizing on the cannabis boom by turning their attention to the
north. Data from Health Canada suggest that almost 130,000
Canadians had signed up with the country’s 38 licensed cannabis
producers by the end of 2016, more than tripling in number from the
previous year. One of these licensed producers is ABcann
Global Corp. (OTCQB: ABCCF) (TSX.V: ABCN) (ABCCF
Profile), which has remained focused
on changing the face of medical cannabis since its launch in 2014.
With fellow licensed producers Canopy Growth Corp. (OTC:
TWMJF) (TSX: WEED), Aurora Cannabis, Inc. (OTCQX:
ACBFF) (TSX: ACB) and Aphria, Inc. (OTCQB: APHQF)
(TSX: APH) all recording huge PPS
spikes approaching or exceeding 1,000 percent following their
respective IPOs, ABcann’s comparatively low market cap, combined
with its strong balance sheet reflecting investment from cannabis
streaming company Cannabis Wheaton Income Corp. (OTC:
KWFLF) (TSX.V: CBW), makes it an intriguing investment
opportunity as Canada prepares to legalize recreational use of
marijuana at the federal level in 2018.
The impending legalization of marijuana for recreational use in
Canada could offer licensed producers a chance to record tremendous
growth in the coming months. According to a 2016 report by
Deloitte, the legal Canadian marijuana market could soon be worth
$18 billion annually. As for volume, Deloitte forecast annual
demand for the plant at about 1.32 million pounds per year. Therein
lies the opportunity. As of the 2016 report, Canada’s network of
licensed growers produced about 20,000 pound of dried marijuana per
year. Just last week, investors were given an early glimpse into
the possibilities presented by this supply bottleneck.
As reported by Vice News,
New Brunswick’s financial minister last Friday announced two
historic supply deals with Organigram and Canopy Growth Corp. with
a combined value of more than $80 million. Both companies saw a
jump in share prices following the announcement, but the scale of
these agreements demonstrates the nearly insatiable demand for
volume in the Canadian cannabis market ahead of next year’s
legalization measures. The Financial
Post notes that Organigram’s supply agreement with New
Brunswick accounts for about 25 percent of its anticipated annual
production. With Quebec and Ontario having recently floated details
of their individual plans for July’s complete marijuana
legalization goal and the other seven Canadian provinces now on the
clock, the market is ripe for expansion.
“These are the first agreements that any province has signed for
supply from licensed producers in Canada,” Organigram CEO Greg
Engel told the Financial Post. “Part of the initiative to get this
supply agreement in place was they understand that there will be a
supply deficiency for the first couple years of the adult
recreational market, and they wanted to make sure that they were in
a position to get a significant supply going forward and be the
first to do so.”
ABcann
Global Corp. (OTCQB: ABCCF) (TSX.V: ABCN) with its
fully operational Vanluven production facility, is well-positioned
to capitalize on this expansion. The company’s computer-controlled
growing platform helps it produce in excess of 250 grams of
cannabis per square foot each year, placing it among the highest
yields within the Canadian sector, according to data from PI Financial.
Likewise, these reliable growing systems have proven extremely
adept at producing a consistent chemical compound from plant to
plant and batch to batch, allowing ABcann to achieve a long-term
cannabinoid profile with deviations of less than 10 percent. This
is particularly noteworthy as some competitors within the Canadian
cannabis market have faced product recalls resulting from
substandard consistency and other production issues.
Canada’s largest cannabis producer, Cannabis Growth
Corp., through its recently-acquired Mettrum Health Corp.
subsidiary, is one company that has faced product
recalls in recent months. Health Canada classified the product
deficiency as a Type III recall, defined as “a situation in which
the use of, or exposure to, a product is not likely to cause any
adverse health consequences.” Aurora Cannabis,
Inc. announced a Type II
recall of its products in January 2017, with some of its
marketed offerings containing “residual levels of myclobutanil
and/or bifenazate that exceed any of the levels permitted in food
production for these two pesticides.” Aphria, Inc.
initiated a Type III
recall of its own in March 2017 due to mislabeling of the
delta-9-tetrahydrocannabidiol (THC) content of some of its
products.
In the face of these quality concerns in the burgeoning
industry, ABcann has not had any product recalls. The company’s
management team notes that ABcann’s reputation for the consistent
production of pharmaceutical-grade cannabis will be vital to both
its expansion within Canada and its entry into additional global
markets.
Leaning on this reputation for quality, ABcann has already
outlined some aggressive expansion plans designed to help it widen
its presence in the fertile Canadian cannabis market. The company’s
Vanluven facility in Napanee, Ontario, boasts 15,000 square feet of
production space, and management expects completion of an
additional 15,000-square-foot expansion at the site sometime in
2017. Looking ahead, ABcann also owns a 2,649-hectare parcel of
land near its Vanluven facility, known as its Kimmett facility,
upon which it plans to construct a 150,000-square-foot
facility offering annual cannabis production capacity of 20,000
kilograms. In late July, the company provided an update on these
construction efforts, noting that its plans to commence
construction at the Kimmett facility remain on track for the third
quarter of 2017, with first cultivation from the facility expected
in the fourth quarter of 2018. These plans are supported by
ABcann’s strong cash position.
ABcann earlier this week reported (http://nnw.fm/zQY7o) total proceeds of $11.9 million
from the exercise of warrants since its acquisition of ABcann
Medicinals, Inc. in April, bringing the company’s working capital
to $45 million, to be used to significantly increase production
capacity in 2018.
“ABcann thanks our shareholders for their continued support and
confidence as we work toward expanding our facilities and
increasing production. Our strong financial position, represented
by our current cash position is earmarked for new construction and
will facilitate the timely execution of our business plan. The
Company’s main focus in the coming months will be on the deployment
of capital towards the expansion of our existing Vanluven facility
and development and construction of the new Kimmett facility, as
well as the pursuit of our international expansion plans,” ,”
stated director and CEO Aaron Keay, who as of October 1 will be
replaced by incoming CEO Barry Fishman (http://nnw.fm/WrOQ4).
This strong cash position is anchored to news from early August,
when ABcann announced
the close of a $15 million investment by Cannabis Wheaton
Income Corp., the world’s first cannabis streaming
company, as part of a larger phased investment to fund its
expansion efforts. As noted on its website, Cannabis Wheaton aims to construct a
pan-Canadian network of streaming partners connecting licensed
producers with consumers. This falls in line with ABcann’s current
operations, though, notably, the company has already outlined plans
for growth beyond the Canadian border.
In its August 2017 corporate
presentation, ABcann highlights its active global initiatives
targeting cannabis markets in Europe, Israel and Australia. It is
in this area that the company’s proven track record of quality
production is expected to be most valuable. As a member of ABcann’s
management team told NetworkNewsWire, “With Canadian growers moving
so fast into commercial production, the opportunities will be in
growing international markets. The licensed producer's with the
best domestic reputations for quality consistency and capacity will
be the winners in the new emerging markets ... We expect ABcann to
be successful in the global supply chain.”
Its plans for the construction of a 150,000-square-foot
production facility in the coming months place ABcann in the upper
echelon of growers in Canada’s developing cannabis market. It’s
joined in these ranks by Canopy Growth, the nation’s largest
licensed producer, which operates a diverse collection of brands
supported by over half a million square feet of indoor greenhouse
production capacity. Canopy Growth was first granted a licensed to
legally produce marijuana in January 2014, and its production
facility was the first approved under the Marijuana for Medical
Purposes Regulations in April 2014. This early-mover status
propelled the company to rapid expansion, as it became the first
company in the marijuana industry to achieve a valuation of $1
billion in November 2016. ABcann will look to record similar
growth through its facility expansion projects, as well as its
international growth initiatives.
Despite recent recalls impacting their operations, fellow
licensed producers Aphria and Aurora Cannabis are also competing in
the booming Canadian cannabis space. Marketing a wide variety of
products including capsules, oral solutions and vaporizers, Aphria
has recorded seven
consecutive quarters of positive EBITDA while continuing to
expand its production capacity. Its PPS for its Canada-listed
shares have highlighted the growth potential of this evolving
market, hitting a high of C$7.79 in November 2016 that marked a 967
percent gain from IPO in February 2015. Similarly, Aurora
Cannabis’s Canadian shares rose by 1,419 percent, from June 2015 to
November 2016, to C$3.95 as the company implemented a strategy
combining low-cost production with high customer growth rates in an
effort to maximize market share and compete with low-price
competitors.
With federal legalization of recreational use scheduled for
2018, the Canadian cannabis industry is in the midst of a major
boom. Producers are scrambling to increase production capacity in
the face of a forecast supply dearth, and many are facing the
quality concerns and product recalls that are often associated with
expedited expansion. ABcann Global, on the other hand, is taking a
deliberate approach to the so-called ‘Green Revolution’. In
addition to rapidly increasing its production capacity by
leveraging its strong cash position, ABcann has remained steadfast
in its commitment to consistency and product quality. With no
product recalls in its history, ABcann is well-positioned to both
expand its share of the Canadian cannabis industry and make
strategic entries into promising international markets. These
factors, when combined with a market cap that’s significantly lower
than its competitors in the cannabis space, make ABcann an
intriguing option for investors looking to capitalize on the
impending legalization of marijuana in Canada and beyond.
For more information on ABcann Global Corp. please visit:
ABcann Global
(TSX.V: ABCN) (OTCQB: ABCCF)
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