Eve & Co Has Carved a Niche That Could Soon Bear Fruit

In terms of EV/funded capacity, Eve & Co Inc. (TSXV:EVE) trades at a significant discount to its peers

SmallCapPower | October 22, 2018: Eve & Co Inc. (TSXV:EVE), through its wholly-owned subsidiary Natural Medco Ltd., is a Licensed Producer and seller of dried cannabis and cannabis plants under the Access to Cannabis for Medical Purposes Regulations. Natural Medco is Canada’s first female-founded Licensed Producer and received its cultivation license from Health Canada in 2016 followed by its sales license in June 2018. Eve & Co commenced trading on TSX Venture Exchange on July 4, 2018.

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Led by a team of agricultural experts, Eve & Co operates a 220,000 sq. ft. scalable greenhouse production facility (~800 kg/month) located in Middlesex County, Ontario with 32 acres of adjacent land for future expansion. Eve & Co has broken ground on an additional 780,000 sq. ft. expansion, bringing the Company’s total anticipated greenhouse capacity to 1,000,000 sq. ft with a target annual production capacity of 50,000 kg.

Investment Thesis

  • First female-focused licensed cannabis producer in Canada
  • Sales strategy focuses on both domestic and international markets
  • Aggressive expansion plan – production to increase five-fold

First female-focused licensed cannabis producer in Canada

Eve & Co is Canada’s first female-focused licensed producer of cannabis, cultivating premiere cannabis geared to the female consumer. To promote consumption of cannabis among women, Eve & Co expects to provide educational information and online support for its customers and first-time buyers. Eve & Co’s wholly-owned subsidiary, Natural Medco, received its cultivation license from Health Canada in 2016 and its sales license from Health Canada in June 2018.

Sales strategy focuses on both domestic and international markets

Eve & Co Inc’s strategy focuses on targeting both the medical and recreational cannabis markets within Canada as well as medical markets internationally. In terms of a sales strategy within Canada, the Company plans direct selling to authorized retailers for recreational products (MoU already signed with Ontario Cannabis Store, BC) and B2B/selling to other LPs for medical cannabis. For the international markets, Eve & Co has signed a pre-sales agreement with a pharmaceutical distributor in Germany. Initial sales are expected at 100 kg per month, ramping up to 300 kg after the first year.

Source: Company Presentation

Aggressive expansion plan – production to increase five-fold

To seize a piece of the large recreational cannabis opportunity opening up in Canada after October 17, 2018, Eve & Co is planning an aggressive expansion plan that would increase its production five-fold by 2020. The Company currently operates a 220,000 sq ft. greenhouse space with a production capacity of 10,000 kg per annum. As part of the expansion plan, Eve & Co has begun a 780,000 sq. ft expansion of its greenhouse, taking the total size to 1.0 million sq. ft. for a total production capacity of 50,000 kg per annum.

Outlook and valuation

Eve & Co currently trades at a market cap of a $97 million, which seems compelling given its robust growth prospects. In terms of EV/funded capacity, Eve & Co trades at a significant discount to its peers. As of September 24, 2018, Eve & Co traded at $3.2 versus the peer average of $13.0.  

Source: Company Presentation

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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