National Access Cannabis Stock Could Be a Surprise Sleeper

Unique business focus and strong growth outlook has National Access Cannabis Corp. (TSXV:NAC) looking like a value pick in the cannabis space.

SmallCapPower | March 1, 2018: Unlike most listed players focused on the cannabis production in the Canadian marijuana space, National Access Cannabis Corp. (TSXV:NAC) has a unique focus on patient education and is a practice leader in delivering secure, safe, and responsible access to legal medical cannabis. Through its network of clinics that partner with health professionals, National Access Cannabis provides patients with knowledge and the legal medical documentation required to navigate Canada’s disparate network of authorized Licensed Producers of Cannabis.

Over the past year, National Access Cannabis has significantly expanded its clinics and the associated memberships, which in turn has increased its revenues to $0.44 million in Q1 2018. Given the growth outlook and the impeding recreational legalization in Canada, National Access Cannabis looks attractive at the current market cap of $110 million.

Investment thesis

  • Unique business focus of educating patients for securing safe access to legal medical cannabis
  • Receipt of cannabis retail store licenses in Manitoba marks its entry into marijuana distribution

Best-practices leader in delivering secure and safe access to legal medical cannabis

National Access Cannabis has a unique focus on patient education and is a practice leader in delivering secure, safe, and responsible access to legal medical cannabis in Canada. Through its network of clinics that partner with health professionals, National Access Cannabis provides patients with knowledge and the legal medical documentation required to navigate Canada’s disparate network of authorized Licensed Producers of Cannabis.

NAC assists patients at each stage of accessing medical cannabis

National Access Cannabis currently has clinics at 10 locations spread across Victoria, BC; Edmonton, AB; Toronto, ON; and Ottawa, with plans to expand its operations to all economically-viable locations in Canada through partnerships. As of November 2017, total memberships increased to 10,883 from 1,918 at November 30, 2016. National Access Cannabis has sufficient funding for the expansion and recently (Jan 2018) completed a non-brokered private placement offering worth $6.0 million.

Receipt of cannabis retail store licenses in Manitoba marks entry into marijuana distribution

On February 16, 2018, National Access Cannabis received licenses along with three others (Delta 9 Cannabis Inc.- Canopy Growth Corporation consortium, Hiku Brands Company, and 10552763 Canada Corporation) from the Government of Manitoba to operate privately-owned retail cannabis stores in the Province. Under the terms of the Retail Organization Agreement with the Manitoba Provincial Government, National Access Cannabis will be allowed to build, develop and operate in approved municipalities but the number of locations remains subject to ongoing discussions with the Province. Expertise in operating nationwide medical cannabis care clinics coupled with strong relationships with licensed producers and First Nations, positions National Access Cannabis as a recreational marijuana distributor going forward. As part of the store development, National Access Cannabis plans to strengthen its relationships with CannaRoyalty Corp. (CSE:CRZ), Cannabis Wheaton Income Corp. (TSXV:CBW), and Tilray. In December 2017, National Access Cannabis announced that it had entered into limited partnership agreements with five Manitoba Indigenous First Nations (Opaskwayak Cree, Long Plain, Peguis, Nisichawayasihk Cree, Brokenhead Ojibway) to establish a retail recreational cannabis distribution network in Manitoba, when and if legally permissible to do so.

National Access Cannabis expects to open a network of retail cannabis stores in Manitoba by Q3 2018, post-recreational legalization in Canada, which is anticipated by the summer of 2018.

Expands internationally with license agreement with The Hydroponics Company of Australia

On December 6, 2017, National Access Cannabis inked a binding license agreement with The Hydroponics Company Limited, under which THC will license NAC’s medical clinic operation model for an initial period of 10 years in Australia and New Zealand. As per the agreement, National Access Cannabis will provide THC exclusive access to certain intellectual property and marketing expertise of National Access Cannabis in connection with the development of a professional cannabis clinic model in Australia and New Zealand. THC will pay National Access Cannabis a licensing fee of A$500,000 upon, or before, the second anniversary of the agreement or upon achieving initial gross revenue of A$1.0 million. Thereafter, THC will pay National Access Cannabis ongoing quarterly royalties of 7.5% of its gross revenue until such time as the licensing agreement expires.

Outlook and Valuation

National Access Cannabis has a unique business model in the Canadian cannabis space, focusing on patient education compared to the majority of participants that are focused on cannabis production. Over the past year, National Access Cannabis has significantly expanded its clinics and the associated memberships, which in turn has increased its revenues to $0.45 million in Q1 2018. Given the growth outlook and the impeding recreational legalization, National Access Cannabis looks attractive at the current market cap of $110 million.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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