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3 Canadian Licensed Producers Flying Under The Radar

Mar 29, 2019 • 10:14 AM GMT+0000
9 MIN READ  •  By Anthony Varrell
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Canadian Licensed Producers (LPs) has been one of the most attractive sub-sectors of the cannabis industry for several years and this is an opportunity that we have been closely monitoring.

During the last year, Canadian LPs have seen increased interest from multi-national-corporations like Constellation Brands (STZ) and Altria (MO). This is one of the most attractive trends in the cannabis industry and we expect to see more investments like this over the next year.

Today, we have highlighted 3 Canadian Licensed Producers that have been flying under the radar and we have been closely monitoring these opportunities. We believe that these 3 Canadian LPs are well positioned for growth and believe that investors should be watching these.

Aleafia Health: A Company with Catalysts for Growth

Aleafia Health Inc. (ALEF.TO) (ALEAF) is a Canadian cannabis producer that has been nothing short of an execution story and we are favorable on its growth prospects after the completion of the Emblem acquisition. We believe that the combined company has massive potential and believe that this opportunity has been flying under the radar.

Earlier this year, Aleafia Health was named as the 2019 TSX Venture 50 top performing company of the year and we are favorable on this achievement. In March, the Canadian cannabis producer commenced trading on the TSX exchange and we found this development to be significant. Aleafia Health has been under considerable pressure following this up-listing and we believe that this created a significant opportunity for investors.

When it comes to companies with significant growth prospects, Aleafia Health is an opportunity that cannot be ignored. Since inception, the company has been focused on making accretive acquisitions and has been acquiring attractively valued businesses that generate significant cash flow. We are favorable on this strategy as well as the acquisitions of Emblem and Canabo Medical Corp. The combination of these businesses will make Aleafia Health a leading Canadian clinic network that has access to 40 national medical clinics and education centers that have served almost 60,000 patients.

We have been favorable on the cannabis clinic opportunity due to the amount of valuable patient data that is generated. The combination of Emblem and Canabo Medical is very attractive and this is something we are closely watching. We believe that the cannabis clinic market as well as the data that is generated by it represent a massive opportunity for Aleafia Health and expect this revenue stream to become much more significant over the next year.

Aleafia Health is a company that has significant catalysts for growth and we are bullish on the growth prospects associated with its acquisitions. Through Emblem, the company has significant leverage to the Canadian cannabis market (medical and recreational) as well as the German medical cannabis market. Emblem also provides Aleafia Health with attractive leverage to the smokeless product market and we are favorable on the value that can be created by offering these products to directly to its patient base for the first time.

Although Aleafia Health has been executing flawlessly and has been advancing its fundamental story, the shares have been under considerable pressure and this is a trend that we are monitoring. The company is led by a management team that has a proven track record of success and we are favorable on its ability to execute. We believe that Aleafia Health represents a compelling play on the burgeoning cannabis market and this is an opportunity that investors should be watching.

RavenQuest BioMed: An Underappreciated Growth Opportunity

During the last year, we have been covering RavenQuest BioMed (RQB.CN) (RVVQF) and believe that this opportunity has been flying under the radar. The Canadian cannabis producer represents a multi-faceted growth opportunity and we have been closely watching the company following the recent decline.

Although RavenQuest has been advancing its operations and executing on its growth initiatives, the shares have been coming off its late January highs and we have been watching the decline. RavenQuest is trading below the pricing of its previously announce private placement and this is something that caught our attention.

Earlier this year, RavenQuest announced a letter of intent to be the exclusive distributor of seeds from award winning, Amsterdam-based, cannabis seed producer Dutch Passion. Through this relationship, RavenQuest expects to be able to address two distinct markets in Canada, home-growers and micro-cultivators. The Canadian cannabis producer plans to offer two varieties, a premium market Dutch Passion and value-market SeedStockers, which will also be sold under RavenQuest’s private label.

We are favorable on the company’s focus on the home-grow and micro-cultivator market. We believe that this market represents a significant, high margin business opportunity and will monitor how the team executes on this. Dutch Passion seeds will give Canadian home-growers and (micro) Licensed Producers access to a wide selection from over 60 premium seeds and this represents a significant offering.

Canadians are now permitted to grow up to four plants at home and we believe that this relationship provides RavenQuest with attractive leverage to this market. We believe that Dutch Passion represents a strategic partner for RavenQuest. Dutch Passion is one of the world’s oldest cannabis seedbanks and is one of the few remaining original seed companies and has won more than 50 Cannabis Cups. The company has been focused on increasing the number of revenue streams that are generating strong cash flow and we are favorable on this.

RavenQuest BioMed is a company that has significant growth prospects and we believe that the market underappreciates this. The Canadian cannabis producer represents a differentiated opportunity and we are favorable on its relationships with unique Indigenous communities. When compared to its peers, RavenQuest is trading at a considerable discount and we believe that the market underappreciates the company’s growth potential. Last year, we met with RavenQuest CEO George Robinson at several conferences and were very impressed with what he has been able to accomplish. This is an opportunity to be watching and we will be keeping an eye on how George and his team continue to execute.

GTEC Holdings: An Emerging Cannabis Opportunity

GTEC Holdings Ltd. (GTEC.V) (GGTTF) is a Canadian cannabis producer that we have been following and believe that it has been flying under the radar. Last year, the company came under pressure after its merger with Invictus MD Strategies (GENE.V) (IVITF) was called off and we think this weakness created a great opportunity for investors. When you look at GTEC from a valuation standpoint, you can see that this opportunity is undervalued when compare it to its peers and we believe that the market underappreciates this opportunity.

When compared to its peers, GTEC represents a differentiated opportunity and has an attractive structure. The Canadian cannabis producer is taking a wait-and-see approach with its buildouts and plans to analyze how these facilities operate before focusing on expanding capacity for the ones that are the most profitable. This is a different approach and we are favorable on this operating structure and have provided an update on the existing facilities:

  • Alberta Craft Cannabis Inc. (ACC): The 14,000 sq. ft. craft cannabis cultivation facility is based in Edmonton, Alberta and has been generating revenues. The facility is fully operational and is able to produce 1,300 kilograms of cannabis per year.
  • Tumbleweed Farms: GTEC recently completed construction on its 10,000 sq. ft. purpose-built facility in Chase, BC (expected to produce 1,000 kilograms of cannabis per year). The company is actively pursuing its Cultivation License for this facility.
  • Grey Bruce Farms: GTEC completed a major retrofit of an existing industrial building and anticipates fully completing the 15,000 sq. ft. cannabis cultivation facility later this month. The facility is projected to produce 1,640 kilograms of cannabis per year.
  • GreenTec Bio-Pharmaceuticals: The facility is GTEC’s flagship, purpose-built facility located in Kelowna, BC. GreenTec is currently in Phase 1 of development, building 20,000 sq. ft. of its planned 80,000 sq. ft. cannabis cultivation facility. Last year, the company started construction and it expects the facility to be completed in mid-2019. GreenTec is projected to produce 2,150 kilograms of cannabis per year.
  • 3PL Joint Venture: This pertains to an agreement with F-20 Developments to develop a premium indoor cultivation facility in Vernon, BC. The 3PL (three per light) facility is currently being retrofitted to facilitate the cultivation of ultra-premium cannabis. Phase 1 of this partnership is currently underway, with completion anticipated in the third quarter of 2019. 3PL is projected to produce 8,000 kilograms of cannabis per year.

Last month, GTEC reported a significant milestone after ACC completed its first harvest of 2019 and is now operating at a fully utilized production capacity. ACC expects to be harvesting every 10 days and the company expects to see ACC exceed its projected annual output of 1,300 kilograms of premium cannabis due to the harvests having higher yields than originally anticipated. We are favorable on the growth prospects associated with ACC and believe that the better-than-expected production yield could lead to GTEC reporting strong revenue growth for the quarter.

GTEC is a company that has significant catalysts for growth and we believe that the market underappreciates this opportunity. The recent developments have significantly advanced the fundamental story and we are favorable on the improved capital structure after the recent capital raise. One of the reasons why we are excited about GTEC is due the relationships in place. We believe that the company’s strategic relationships are an important aspect of the story and will monitor how the team continues to execute. GTEC has been coming off its recent lows and this is an opportunity to be watching.

 

 

 

 

 

Pursuant to an agreement between StoneBridge Partners LLC and Aleafia Health Inc. (ALEF) we have been hired for a period of 180 days beginning February 1, 2019 and ending August 1, 2019 to publicly disseminate information about (ALEF) including on the Website and other media including Facebook and Twitter. We are being paid $7,500 per month (ALEF) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (ALEF), which we purchased in the open market. We plan to sell the “ZERO” shares of (ALEF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (ALEF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

Pursuant to an agreement between StoneBridge Partners LLC and GTEC Holdings LTD. we have been hired for a period of 365 days beginning July 1, 2018 and ending July 1, 2019 to publicly disseminate information about (GTEC) including on the Website and other media including Facebook and Twitter. We are being paid $6,500 per month for a period of 12 months. We own zero shares of (GTEC), which we purchased in the open market. We plan to sell the “ZERO” shares of (GTEC) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (GTEC) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

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Authored By

Anthony Varrell

Anthony Varrell is Managing Director of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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