MedMen Enterprises Inc. (CSE:MMEN) is one of the largest, full-scale cannabis holding companies with a leading position in the top three addressable cannabis markets in the United States
SmallCapPower | June 13, 2018: MedMen Enterprises Inc. (CSE:MMEN), a U.S. marijuana producer and retailer, began trading in Canada on May 29, 2018, giving Canadian marijuana stock investors a way to play a potentially lucrative growth opportunity when recreational cannabis becomes legal in the majority of U.S. states. In connection with a reverse takeover and the listing on the CSE, the Company raised ~$143 million (US$110 million), through a private placement at an implied enterprise valuation of $2.1 billion (US$1.65 billion).
With more than 800 employees and 18 licensed facilities in California, Nevada and New York, MedMen is one of the fastest-growing companies in the quickly-evolving U.S. cannabis industry. The three states where MedMen currently operates account for about half of the addressable cannabis market in the United States. For reference, according to Cowen & Co., State-sanctioned cannabis sales in the country are estimated at about US$7 billion annually and expected to reach US$75 billion by 2030. The Company’s main value propositions are to operate scalable growing facilities, as well as retail stores that have more of the feel of an Apple Inc. (NASDAQ:AAPL) store, rather than a dispensary.
Investment thesis
- Industry-Leading Cultivation and Production Facilities
- One of the Most Recognized Brands in the Industry
- Prime Market Positioning
Industry-Leading Cultivation and Production Facilities
MedMen operates scalable, highly-efficient cultivation facilities using the latest in agronomic technology and sustainable techniques. Importantly, its manufacturing facilities use standards comparable to those in the biotech and pharmaceutical industries.
The Company owns and operates two cultivation and production facilities, one in Nevada and the other in New York. In addition, MedMen is currently developing additional large-scale cultivation and production operations in California and New York, as well as a genetics facility in Nevada. Management intends to establish a strong foothold in these states as they offer high-growth potential due to their market depth, supply-demand dynamics, and regulatory framework.
One of the Most Recognized Brands in the Industry
Nine premium stores in the United States feature MedMen’s award-winning retail concept, including its flagship store on New York City’s Fifth Avenue, which opened last month. MedMen is licensed to operate a total of four stores in New York State, all of which are currently operational, and the Company plans to upgrade its three other New York stores to align with its distinctive retail brand. MMEN also continues to explore and acquire prime real estate in upscale retail districts in strategic markets across North America. MedMen recently signed a joint venture agreement with Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON) to explore opening MedMen branded and managed stores in Canada, once adult recreational use is legalized.
Expansion into Florida grants access to an estimated US$1.4 billion medical market by 2021
On June 7, 2018, MedMen signed a definitive agreement to acquire cultivation and dispensary assets from Treadwell Simpson Partnership (Treadwell Nursery). Treadwell Nursery’s assets are located on five acres of land in Eustis, Florida. Importantly, the acquisition includes the right to open 25 medical cannabis dispensaries in Florida. For reference, Florida is ranked the third-most populated state in the U.S. and according to Arcview, is estimated to reach $1 billion in annual sales by 2020.
Florida Patient Count
Source: Company Presentation
Prime Market Positioning
MedMen is at the forefront of a nascent industry experiencing explosive growth. According to Cowen & Co., the legal cannabis market in the U.S. is expected to grow eightfold and surpass US$50 billion in annual revenue by 2026 as cannabis consumption rises and existing sales are converted into the legal market. Currently 92% of all states have some form of legalized cannabis ranging from Cannabidiol (CBD)-only to full recreational legalization. Focusing on large addressable markets, existing retail footprint spans approximately 600 million consumers and an estimated US$20 billion in cannabis sales across three states. With dominance in California, Nevada and New York – the Company already has access to nearly half of the entire U.S. addressable market.
Outlook
MedMen is one of the largest, full-scale cannabis holding companies in the industry with a leading position in the top three addressable cannabis markets in the United States. The Company’s early-mover advantage in sub-markets such as Los Angeles, Las Vegas and New York City with secured prime real estate provides a strong defense against future entrants. With more than 800 employees and 18 licensed facilities in California, Nevada and New York, MedMen well positioned to ride the recreational cannabis opportunity.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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