NEW YORK, July 26, 2021 /PRNewswire/ -- Argus Research, an
independent investment research firm, has launched Equity Research
Report coverage on Flora Growth Corp. (NASDAQ: FLGC)
Click Here to view full Argus Equity Research
Report.
COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus
Analyst Steve Silver) include:
- FLGC: A Fast-Growing Global Cannabis Cultivator and Brand
Builder
- Flora Growth leverages cost-effective cannabis cultivation in
Colombia to supply cannabis and
its derivatives for an expanding range of products, including
cosmetics, pharmaceuticals, food and beverages, and hemp-based
textiles.
- The company's outdoor cultivation operation in Colombia — along the equator and at an
altitude of 1500 meters above sea level — benefits from favorable
weather that allows for year-round organic growing. Flora's
production costs are also significantly lower than those of its
Colombian peers, at less than $0.06
per gram.
- To complement its cultivation capabilities, Flora is building
an extraction and processing facility in Colombia. It is also developing a wholesale
cannabis distribution business, and is expanding internationally
through acquisitions and partnerships.
- In our view, Flora Growth is well capitalized, with
$30 million in proceeds from a
December 2020 private financing,
$16.6 million in IPO proceeds, and
the expected infusion of more than $20
million from the exercise of warrants.
- We believe that Flora is attractively valued relative to peers
based on its low cost structure, strong brand portfolio, and
expanding global distribution. Based on our EV/revenue analysis,
our fair value estimate for FLGC is $7.50 per share, more than two-times current
levels.
INVESTMENT THESIS excerpts (Click Here to
view full Argus Equity Research Report):
Founded in 2019, Flora Growth leverages cost-effective cannabis
cultivation in Colombia to supply
cannabis and its derivatives for an expanding range of products,
including cosmetics, pharmaceuticals, food and beverages, and
hemp-based textiles.
In our view, Flora Growth is well positioned to participate in a
global cannabis market that BDS Analytics projects will reach
$56 billion by 2026, up from
$21 billion in 2020. The company's
outdoor cultivation operation in Colombia — along the equator and at an
altitude of 1500 meters above sea level — benefits from favorable
weather that allows for year-round organic growing, and is expected
to yield three annual crop cycles, compared with 1-2 cycles in
other regions. These operations also have low water and electricity
costs. Due to the open-air cultivation, its crop has shown
more-robust growth yields over greenhouse cultivated crops, and a
richer terpene profile, which enhances the flower's aroma. Flora's
operations also benefit from a highly skilled agricultural
workforce, with labor costs that are approximately 10% of those for
comparable operations in the United
States.
As a result, Flora is able to produce dry flower at a
significantly lower cost than most growers. Its production cost of
approximately $0.06 per gram compares
with costs that can exceed $1.00 per
gram in certain parts of North
America. Its costs are also lower than those of its
Colombian peers, with its closest peer currently producing at
$0.15 per gram. Management estimates
that Flora's all-in costs, including packaging and transportation,
are closer to peer average costs for cultivation alone, and
significantly lower than the all-in costs of growers in other
regions.
In our view, Flora is well positioned relative to rival growers
in Colombia. While the Colombian
government has issued approximately 700 cannabis cultivation
licenses, less than 10% are being actively used for growing
operations. Moreover, only three companies in Colombia have the capabilities and
infrastructure to support a growing export market. Internationally,
Colombia competes with
Canada and Portugal in the export market, though Canadian
and Portuguese producers face higher costs. Colombian cannabis
exports are currently subject to quotas, though we expect an open
market system to develop over time.
We believe that Flora's cultivation and manufacturing
capabilities provide barriers to entry for potential competitors.
The company complies with rigorous certification and regulatory
requirements, including GACP for cultivation and GMP for
manufacturing; tracks cannabis genetics from the source flower; and
provides a certificate of analysis for all products and derivatives
in order to provide end-users with a consistent product. Flora
estimates that it is approximately 90% through its organic
certification process. Flora also seeks supply-chain partners
around the world with the same commitment to quality control, this
in order to penetrate the global markets more rapidly.
Flora Growth completed its initial public offering and began
trading on the Nasdaq in May 2021.
Supported by capital from a Regulation A+ financing in late 2020,
proceeds from the IPO, and additional capital expected from the
exercise of "in-the-money" warrants, Flora is executing on three
key initiatives: first, to develop a global supply chain that will
allow it to move cultivated product around the world; second, to
further expand its brand portfolio; and third, to attract talented
employees that will lead the company through its next stage of
growth.
Flora Growth has established itself as an environmentally
conscious company, and announced a commitment to environmental
sustainability in June 2021. Its
organic cultivation practices help to prevent the loss of topsoil,
toxic runoff, water pollution, and soil contamination. In addition,
as noted above, Flora uses the entire cannabis plant to create
textiles, such as those used in its new Stardog Loungewear brand.
This use of the entire plant supports a high ROIC and has helped to
attract interest from sustainability-focused investors. The company
has also focused on biodegradable packaging and the use of recycled
materials. Its Mind Naturals Extra Hydrating Cream with cannabidiol
(CBD) is sold in a 100% biodegradable container, and its KASA
Wholefoods division uses recyclable glass bottles for
beverages.
About Flora Growth Corp. (NASDAQ: FLGC)
Founded in 2019, Flora Growth Corp. manages a portfolio of
international consumer brands supported by low cost, organic
cannabis and cannabis derivatives that are used in a wide range of
products, including cosmetics, pharmaceuticals, hemp textiles, and
food and beverages. The company operates one of the largest outdoor
cultivation facilities in Colombia, benefits from below-industry-average
production costs, and prioritizes organic inputs and value-chain
sustainability across its portfolio. Flora is also expanding
internationally and growing its business through partnerships and
acquisitions.
For more information Please Contact:
Evan Veryard
VP Investor Relations
evan.veryard@floragrowth.ca
1-416-571-9037
About Argus Research Corp. Headquartered in NYC,
Argus Research (www.argusresearch.com) is a leading independent
equity research firm (est. 1934) ̶ providing
fundamental and quantitative research coverage on more than 1,600
companies across all 11 sectors of the S&P 500, as well as
macroeconomic and equity market forecasts, thematic research, model
portfolios and pre-IPO research. In addition, Argus has recently
committed to providing a sponsored research solution for small
& mid-cap companies seeking coverage. Argus's Equity
Research/earnings estimates are available on major research /
earnings estimate aggregator platforms, including Bloomberg,
Thomson Reuters, Factset and S&P Global.
For more Information please contact:
Darrell Stone
646-747-5438
dstone@argusresearch.com
Argus Research Co. has received a flat fee from the company
discussed in this report as part of a Sponsored Research agreement
between Argus and the company. No part of Argus Research's
compensation is directly or indirectly related to the content of
this assessment or to other opinions expressed in this report.
Please refer to the full Argus report and the disclaimer for
complete disclosures.
View original
content:https://www.prnewswire.com/news-releases/argus-research-initiates-equity-research-report-coverage-on-flora-growth-corp-nasdaq-flgc-301340523.html
SOURCE Argus Research