Last month, we published an interview article with Canrim CEO Ranjeet Sundher and this is a topic which our readers have expressed significant interest in. Canrim is highly focused on the Asian CBD opportunity and has invested in two companies that provide Canrim with an early mover advantage on this market.
Today, we want to provide our readers with an in-depth look into the Canrim operation and believe that this is an opportunity to be watching. In the near future, Canrim plans to complete a go-public transaction and list on the Canadian Stock Exchange. We plan to be ahead of the curve with this opportunity and will continue to closely follow the company.
Attractive Operating Structure Provides Exposure to High-Growth Markets
One of the reasons we are excited about Canrim is due to its attractive operating structure. The company is comprised of two portfolio companies, CBD Group Asia (CGA) and Natural Source Group (NSG), that provide direct exposure to strategic Asian markets (China, Hong Kong, Singapore, and Thailand) and we are favorable on the amount of value that can be created through these assets.
CGA is a distribution and investment company focusing on China’s high growth CBD market. Earlier this year, the companies entered into an investment agreement for Canrim to fund and earn up to a 75% ownership in CGA. Through its incubation program in Shanghai, CGA is investing and partnering with CBD related start-ups and established businesses in the region to create new brands and introduce high tech solutions within the CBD sector. We are favorable on the strategy to work with early stage as well as advanced businesses that are levered to the CBD industry and will monitor how the team is able to execute.
CGA provides Canrim with a number of benefits and we are especially favorable on its expanding distribution network. CGA has already secured strategic partnerships with successful North American brands for introduction of their product line into the Asian marketplace through their China focused distribution partners.
When it comes to NSG, Canrim has an exclusive, commercial arrangement to distribute co-branded CBD products across NSG’s platform. NSG has an Asia-wide distribution reach which has been developed conducting sales since 2013. NSG’s underlying investment thesis is that a fundamental imbalance exists between sources of supply and aggregate demand in areas of the emerging frontiers of Asia. We are favorable on the amount of value that can be created through this network and will closely monitor this aspect of the story on a going-forward basis.
Focused on Securing a First-Mover Advantage in Emerging Markets
One of the reasons we are excited about Canrim is due to its leverage to a market that is not saturated with CBD companies. Asia is also the largest market in the world from a population standpoint and we are favorable on the relationship in place to capitalize on this market. According to Hong Kong based investment company Regent Pacific Group, the CBD market in China is expected to be a US $15 billion market by 2024. The investment firm expects beauty and wellness products to be the largest value drivers for the market and we are favorable on the leverage that Canrim has to this market.
Canrim’s portfolio companies provide the Asian market with high quality CBD products from North America. There is strong demand for these products, and we expect Canrim to be benefit from having distribution in leading consumer outlets. These distribution relationships will play an important role when it comes to generating traction and we are bullish on this aspect of the story.
When looking at the Asian CBD opportunity from a legislation standpoint, we believe that the market is moving in the right direction and are favorable on this. Currently, CBD infused cosmetics for the retail market is the only product range which is legal for sale in China. In the near future, the market is expected to expand with the legalization of cannabis infused products and this would be a major catalyst for the business.
Cannabis legalization has made significant strides in Thailand and this is a market that we are closely watching. There have also been significant advancements in markets like South Korea, Japan, Hong Kong and Sri Lanka, and this is a clear trend. Over the next year, we expect to see further advancement as it relates to these markets and will monitor how Canrim is able to capitalize on this.
Several European countries have already legalized hemp and this has become a global trend. Last year, the World Health Organization recommended that CBD be de-scheduled across 194 nations. These regulatory changes could pave the way for CBD to become a legal natural supplement globally and this would be a major catalyst for companies like Canrim.
A Growth Story to be Watching
When we first analyzed Canrim, the strength of the management team was one of the first factors to standout. With regards to any cannabis business, it all starts with the management team and this is an important aspect of the Canrim story. The management team is comprised of international business and capital markets experts who are committed to aggressive, cost effective growth.
CEO Ranjeet Sundher has been nothing short of a success story in the cannabis industry and we are favorable on the experience that he brings to the Canrim team. Sundher has more than 25 years’ experience in the capital markets and has raised over $50 million for public and private companies. He was behind the shell company that completed a transaction with Jushi Holdings earlier this year and we find this to be significant.
Over the next year, we expect to see Canrim benefit from the strategic relationships that are in place from a distribution standpoint. The portfolio companies that fall under the Canrim umbrella have attractive growth prospects and we expect to see additional assets added to the portfolio on a going-forward basis.
We are closely following the Asia focused CBD business and will monitor how the story continues to advance. To learn more about Canrim, please contact email@example.com to be added to our distribution list.
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