The Canadian cannabis stocks we’ve weeded out have solid cash holdings going into Cannabis 2.0 and are poised to go higher with the legalization of edibles in 2020
SmallCapPower | January 31, 2019: Raising capital for cannabis companies is not as rosy as it was during the cannabis bull market of 2017-2018. Recently, cannabis companies have only been able to receive financing in the form of debt and typically only at double-digit interest rates. With constrained access to capital, cannabis companies with strong balance sheets (a strong cash balance and good liquidity) are better poised to outperform in 2020. Today we have dug up four Canadian cannabis stocks that have enough cash to hopefully endure this sector slump.
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*Share price data as at January 29, 2020, data obtained from S&P Capital IQ
Aphria Inc. (TSX:APHA) – $6.40
Cannabis
Aphria produces and sells medical and recreational cannabis-derived extracts in Canada. The Company currently has a 1.1M sq. ft Leamington greenhouse facility, called Aphria ONE, which yields ~100,000 kg per year. The Company also has the Double Diamond facility, boasting a cultivation space of 1.3M sq. ft and yielding 140,000 kg annually. Additionally, the Company has a premium cannabis brand called Broken Coast, produced in a 4,500 sq. ft facility in British Colombia that yields ~7,000 kg annually. While Aphria has ~$450M in convertible debt it is not due until 2024, giving the Company enough time to repay. APHA also recently announced a $100M equity investment from an unnamed investor.
- Market Cap: $1,618.7M
- 30-Day Return: -6.8%
- 90-Day Return: -7.6%
- 90-Day Average Trading Volume: 3,204,970
- Last Cash Balance (Q2/20): $497.7M
VIVO Cannabis Inc. (TSX:VIVO) – $0.36
Cannabis
VIVO Cannabis cultivates, manufactures, and distributes medical cannabis. To increase supply and distribution, the Company entered into agreements relating to strategic equity investments in Canadian cannabis retailers National Access Cannabis Corp., Choom Holdings Inc, and Westleaf Cannabis Inc, all of which either have operations within Ontario or have plans on operating in Ontario. In December 2019, the Company announced a range of Cannabis 2.0 products, including vapes, chocolates, and concentrates that include kief, rosin, bubble hash, wax and shatter. VIVO has partnered with an award-winning Belgian Chocolatier to create Fireside Edibles Chocolates and has launched the products in ON, BC, and AB.
- Market Cap: $106.5M
- 30-Day Return: +100.0%
- 90-Day Return: +49.1%
- 90-Day Average Trading Volume: 650,190
- Last Cash Balance (Q3/19): $56.2M
Fire & Flower Holdings Corp. (TSX:FAF) – $1.05
Cannabis Retail
Fire and Flower currently operates 46 cannabis retail outlets opened as at the end of January 2020. The Company excepts to have 65 retail locations open by the end of Q2/20 and 85 by Q4/20. Last July, Fire and Flower announced that it had entered into a subscription agreement with Alimentation Couche-Tard Inc. The sub agreement allows for Couche-Tard to provide Fire & Flower with an investment in aggregate of up to $380M.
- Market Cap: $146.7M
- 30-Day Return: +15.6%
- 90-Day Return: +1.0%
- 90-Day Average Trading Volume: 481,700
- Last Cash Balance (Q3/19): $42.9M
MediPharm Labs Corp. (TSX:LABS) – $3.00
Cannabis Extraction
MediPharm Labs is the first company in Canada to receive a license to become a cannabis oil processor without first having a cultivation license. MediPharm Labs produces purified, pharmaceutical-like cannabis oils and concentrates through its cGMP and ISO standard clean rooms laboratory. MediPharm Labs has invested in expert, state-of-the-art technology and extraction methods to deliver safe cannabis products to consumers and patients. On January 24, 2019, LABS announced that it had launched a legal claim against a cultivator for $9.8M for outstanding payments in arrears. It was revealed by BNN Bloomberg, that the counterparty in the suit was HEXO Corp. HEXO inherited the contract through the Newstrike acquisition and is likely trying to conserve capital, rather than the claim being an issue with the quality of MediPharm’s product.
- Market Cap: $394.6M
- 30-Day Return: -19.2%
- 90-Day Return: -32.8%
- 90-Day Average Trading Volume: 1,010,050
- Last Cash Balance (Q3/19): $42.3M
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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