New York, New York (NetworkNewsWire) – The Canadian government’s
plan to push through legalization of marijuana for recreational
purposes by mid-2018 figures to deal a serious blow to the existing
black market. However, industry analysts are increasingly skeptical
of the ability of the country’s Licensed Producers to keep pace
with this forecast spike in demand. As noted in a recent article
published by CBC, “Unless something changes quickly, the supply of
available pot come legalization next July, will be inadequate, and
the black market will continue to thrive.” ABcann Global
Corp. (OTCQB: ABCCF) (TSX.V: ABCN) (ABCCF
Profile), with its healthy cash
position and aggressive expansion plans, is one company seeking to
address these supply concerns, particularly in the medicinal
market. Joined in the space by Canopy Growth Corp. (OTC:
TWMJF) (TSX: WEED), Aurora Cannabis, Inc. (OTCQX:
ACBFF) (TSX: ACB), Aphria, Inc. (OTCQB: APHQF)
(TSX: APH) and Medical Marijuana, Inc. (OTC:
MJNA), ABcann’s relatively low market cap and beefy
portfolio of pharmaceutical-grade IP have it on the radar of
investors looking to capitalize on Canada’s much-anticipated
“green” revolution.
Mere months out from its initial public offering, ABcann Global
Corp. (OTCQB: ABCCF) (TSX.V: ABCN) has already shown tremendous
potential in setting itself apart from other Canadian growers. The
backbone of the company’s operations, which focus on the
development of consistent pharmaceutical-grade products that are
organically grown and pesticide-free, is its proprietary growing
technology. As noted on its website, ABcann’s products are always
free of chemicals and produced in small batches to ensure high
quality standards. This commitment to quality has helped ABcann
steer clear of the recent wave of product
recalls in the Canadian cannabis market that has affected many
of the industry’s biggest names.
Scaling these operations has become a major focus for ABcann’s
management team in recent months, as highlighted by the company’s
latest strategic moves. In mid-September, ABcann announced its
reception of $11.9 million in total proceeds from the exercise of
warrants. When combined with an earlier investment from cannabis
streaming company Cannabis Wheaton Income Corp., the infusion
brought ABcann’s cash position to approximately $45 million. As
Aaron Keay, director of ABcann, noted in that news release, “The
Company’s main focus in the coming months will be on the deployment
of capital towards the expansion of [its] existing Vanluven
facility and development and construction of the new Kimmett
facility, as well as the pursuit of [its] international expansion
plans.” These facilities mark another upside of ABcann’s business
model, as the company owns the land it intends to use for these
expansion projects, eliminating potentially costly leasing
expenses.
Supported by a strong management team and guided by an
experienced advisory board featuring the “Father of Cannabis
Research” Dr. Raphael Mechoulam, ABcann’s favorable production
yields place it at the forefront of an extremely competitive
market. In its corporate
presentation, ABcann compares its yields with industry averages
based on PI Financial estimates. Cannabis industry mainstay
Canopy Growth Corp.’s (OTC: TWMJF) (TSX:
WEED) indoor yield per square foot is estimated at roughly
100 grams. Comparatively, ABcann’s indoor yield clocks in at nearly
350 grams per square foot, and the company is targeting further
refinements that could support yields in excess of 425 grams per
square foot in the near future, far outpacing industry
averages.
PI Financial, in a May 2017 report, provided some insight into
the potential upside offered by ABcann’s proprietary growing
techniques as the Canadian cannabis market enters its latest boom
period. The analyst firm notes that ABcann is currently on course
to reach breakeven as soon as the second quarter of 2018, with a
ramp up in sales to $74.2 million forecast for fiscal 2019. These
projections came alongside a ‘Buy’ rating and a 12-month price
target of C$2.25 for ABcann’s Canada-listed shares, which were
trading at C$0.96 as of close of market on September 29.
Promising research reports aside, ABcann’s recent efforts to
address the expected shortfall in Canadian cannabis supply place it
at the forefront of the blossoming industry. Its strong cash
position is being used to both expand its fully-operational
Vanluven facility and continue construction of its
150,000-square-foot Kimmett facility. As noted in a July news
release, ABcann expects first cultivation from the Kimmett facility
in the fourth quarter of 2018, with the project reaching full
production capacity by the first quarter of 2019. With this
expansion, the company will look to expand on its position in the
Canadian market while pursuing a number of global initiatives in
Europe, Israel and Australia. “We expect that the increase in
production capacity will enable ABcann to increase the sales of our
premium, organically grown, pesticide free cannabis products in the
current domestic market and position the Company for global
distribution in the emerging markets we have targeted,” Keay noted
in an August update. “Further, the ability to serve larger and
broader markets as a result of the production increase positions
ABcann extremely well for the anticipated adult consumer market in
July 2018.”
ABcann is joined in the Canadian cannabis sector by a number of
companies exploring expansion options of their own. Canopy Growth
Corp., widely-recognized as Canada’s first $1 billion weed company,
operates a number of core cannabis brands targeting both medicinal
and recreational markets. Perhaps most notable in this brand
portfolio is Tweed, which Canopy calls “the most recognized
marijuana production brand in the world” on its website. The
production capacity of the Tweed brand highlights the massive
market potential of ABcann’s current construction efforts. Per the
Canopy Growth Corp. website, Tweed currently maintains roughly
168,000 square feet of licensed production space, and its campus
located at the former Hershey Chocolate factory has about 500,000
square feet of available space for expansion. In other words,
ABcann’s 150,000-square-foot Kimmett facility, upon completion,
will see the company’s production space surpass one of the world’s
most notable cannabis brands, and its superior yields should push
ABcann’s production figures well beyond the current limits of
Canopy’s flagship label.
Aurora Cannabis (OTCQX: ACBFF) (TSX: ACB), on
the other hand, had already set its sights on the forecast supply
dearth expected to hit the Canadian market in the coming months. In
November 2016, Aurora announced
the start of construction on an unprecedented 800,000-square-foot
production facility that it’s calling ‘Aurora Sky’. Completion of
this project would mark a huge capacity increase from Aurora’s
current facility, which clocks in at just 55,200 square feet.
In May, Aphria (OTCQB: APHQF) (TSX: APH) threw
its hat into the ring when it announced
plans to triple its production capacity as part of its four-part
construction effort in Leamington, Ontario. The expansion project
is on course for completion in July 2018, according to Aphria CEO
Vic Neufeld. Meanwhile, Medical Marijuana (OTC:
MJNA), the first publicly traded cannabis company in the
United States, has continued to fortify its presence on the
international cannabis scene, becoming the first company to have
cannabis products subsidized by the Mexican government earlier this
year.
Legalization of cannabis for recreational use is creating a huge
opportunity for Licensed Producers in Canada. While quality
concerns and product recalls have impacted the expansion efforts of
many of the industry’s most recognizable names, the importance of
consistent and dependable growing techniques has been reaffirmed.
ABcann’s combination of a promising IP portfolio, a strong cash
position, sizable real estate assets and a relatively low market
cap – combined with a clean sheet in terms of product recalls and
quality blunders – make it an intriguing investment option in the
Canadian cannabis industry. Look for big moves as the company
approaches ramp up of production at its new facilities in the
coming months.
For more information on ABcann Global Corp. please visit:
ABcann Global
(TSX.V: ABCN) (OTCQB: ABCCF)
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