The legal marijuana industry continues to attract new investors and many do not have access to the information they need to make educated investment decisions.
While we are favorable on the legal marijuana market in the United States, we feel more secure investing in countries where the government has made the cultivation and selling of medical marijuana legal.
Canada has been leading the global legal marijuana movement and we have highlighted three cannabis opportunities that investors should be watching.
Cronos Group: Secures $40 to Fund Domestic Expansion
Cronos Group (MJN.V) (PRMCF) is a company we have been watching closely. The licensed medical marijuana producer is a geographically diversified and vertically integrated cannabis company that operates two wholly-owned ACMPR licensed producers and owns a portfolio of minority investments in other licensed medical marijuana producers.
In late May, Cronos’ wholly-owned licensed producer (Peace Naturals Project) broke ground on a 315,000-sq. ft. expansion that includes a 286,000-sq. ft. production facility, a 28,000-sq. ft. greenhouse, and an additional 1,200 sq. ft. extraction lab. The facility is expected to produce 40,000 kg of marijuana per year and is expected to be completed by November (fully operational by summer 2018).
Last week, Cronos secured the capital it needs to fund the continued construction of its expanded facility and entered a commitment letter for $40 million in debt financing (12% interest and two-year term) with Romspen Investment Corp. The loan will be made available in multiple advances and is expected to begin in September.
We are favorable on Cronos’ leverage to the burgeoning legal marijuana industry and its long-term outlook. MJN.V has pulled back and has fallen more than 7% from its high last week. We are monitoring the recent pullback and believe that Cronos is a stock to watch.
CanniMed: Signs Agreement with South African Cannabis Firm
CanniMed Therapeutics (CMED.TO) (CMMDF) is focused on the Canadian medical marijuana market with its go to market strategy of physician education and significant investments into alternative delivery formats. CanniMed produces cannabis in a GMP compliant facility and has benefited from a trend toward smokeless marijuana products.
We are favorable on CanniMed’s leverage and focus on the cannabis oil market. The company was one of the first licensed producers to receive a license to sell cannabis oils and in the second quarter, cannabis oil accounted for almost 50% of total revenues.
Last week, the company signed a definitive supply agreement with Akula Trading 2 Pty Ltd., a private South African corporation. The agreement contemplates export sales of CanniMed oil products in Africa and is initially focused on South Africa, which has a population of 55 million, before entering other African countries.
CanniMed is preparing an application for the sale of cannabis oil for the South African Medicines Control Council (MCC) and will prepare an application for the sale of capsules next.
Medical marijuana is expected to be prescribed in South Africa through an application by a medical doctor and dispensed through pharmacies.
CanniMed has been under pressure since late July and the shares are down more than 14% since then. We are favorable on the company’s leverage to the high demand for smokeless products and its international presence. Stay tuned because CanniMed is making moves!
credit:420intel.com
