Aurora Cannabis Inc. (TSX:ACB) continues to focus on enhancement and expansion
SmallCapPower | March 29, 2018: Aurora Cannabis Inc. (TSX:ACB), headquartered in Vancouver, BC, produces and distributes medical marijuana products in Canada. The Company’s core business focuses on sales of dried cannabis and cannabis oil. Also, Aurora Cannabis provides counseling and outreach services to assist patients in safe and effective usage of medical cannabis.
Aurora Cannabis is expanding on its domestic production facilities with the upcoming Aurora Sky and Aurora Lachute locations, and widening its international presence in Europe, Australia and Africa through strategic tie-ups. Recently, Aurora Cannabis acquired Saskatchewan-based CanniMed Therapeutics in an $852 million cash-and-stock deal. The Company’s focus on innovation and technological upgradations makes it one of the leading marijuana producers.
Investment Thesis
- Organizational agility and innovation
- High-tech and extensive production facilities
- Increasing global footprint
Organizational agility and innovation
Aurora Cannabis is well placed to exploit the global cannabis opportunity, with a total market potential of $12 billion in Canada, $37 billion in the European Union and $110 billion in the rest of world, on the back of its agility and innovation measures. In the last two years, Aurora Cannabis has significantly gained active registered patients totaling 23,000.
Furthermore, Aurora Cannabis is making efforts to establish itself as a world-leading brand in the marijuana industry through innovation across all operational areas – customer experience, production and partnerships. It is the only licensed producer with a mobile application for purchasing medical cannabis and offers same-day delivery in Calgary, Edmonton and surrounding areas. The Company’s production facilities are one of the most technologically advanced, and its Aurora Mountain, Aurora Sky, and Aurora Larssen Projects are accredited.
Aurora Cannabis is partnering with firms such as Radient Technologies Inc. (TSXV:RTI), Namaste Technologies Inc. (CSE:N), Micron Waste Technologies Inc. (CSE:MWM), and CannaRoyalty Corp. (CSE:CRZ) for greater innovation in its approach.
High-tech and extensive production facilities
Aurora Cannabis’ main production facility is the 55,000 square foot Aurora Mountain, in Mountain View County, Alberta. This facility has been operational since 2015 with a consolidated capacity of 4,800 kg/year. This is the first purpose-built cannabis facility with EU GMP certification. Aurora Cannabis operates another 40,000 square foot facility, Aurora Vie, located in Pointe-Claire, Quebec, whose focus is on specialty strains for premium products and medical research.
Two more production facilities, Aurora Sky and Aurora Lachute, are coming online in 2018. Located at Edmonton International Airport, Aurora Sky will be the world’s most technologically-advanced cannabis facility spanning across 800,000 square feet, focused on the mass-cultivation of ultra-low cost, high-quality cannabis. The production capacity of Aurora Sky will be more than 100,000 kg/year and is expected to be completed by mid-2018. Also, Aurora Lachute is nearly completed, a state-of-the-art 48,000 square foot facility near Montreal with production capacity in excess of 4500 kg/year.
Recently, Aurora Cannabis acquired Saskatchewan-based CanniMed Therapeutics in a cash-and-stock deal valued at $852 million, a 181% premium over its initial bid. Through this deal, 20,000 new medical patients will come under Aurora Cannabis and its capacity will get enhanced by 19,000 kilograms per year.
Increasing global footprint
Aurora Cannabis is expanding its presence beyond Canada through strategic partnerships and acquisitions. In 2017, the Company acquired Germany-based Pedanios GmbH, a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union. Through Pedanois, Aurora Cannabis is serving more than 2,000 pharmacies in Germany and has access to the single largest federally-legalized medical cannabis market with a potential market size of 82 million. In fact, Pedanois serves as Aurora Cannabis’ gateway into the EU cannabis market.
Aurora Cannabis is planning a 1,000,000 square feet high-technology facility in a joint venture with Denmark-based Alfred Pedersen & Son, one of Europe’s largest greenhouse growers of vegetables. The joint venture, Aurora Nordic, will have 51% ownership by Aurora Cannabis and will be focused on catering to Nordic countries. This facility is going to be the largest cannabis facility in Europe. Additionally, the marijuana company is planning to enter markets beyond Europe, such as Australia, South Africa and the Cayman Islands.
Outlook and Valuation
Aurora Cannabis’ sustained focus on innovation, technological advances, and domestic and global expansion has positioned the Company as an early leader in the global cannabis industry. Aurora Cannabis has a track record of increasing its production at a rapid pace compared to its competitors. The recent CanniMed Therapeutics acquisition and anticipated legalization of recreational marijuana in Canada this summer enhances the overall prospects of Aurora Cannabis. In terms of valuation, the Company’s stock trades at market capitalization of $5.32 billion with price-to-book multiple of 8.24x.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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