Current stock price of The Tinley Beverage Company Inc. (CSE:TNY) does not reflect the potential growth in its business over the coming quarters
SmallCapPower | August 1, 2017: The Tinley Beverage Company Inc. (CSE: TNY), formerly a resource company under the name Quia Resources Inc., entered the cannabis business in late 2015. In June 2016, Tinley Beverage started a commercial bottling run for its Hemplify product and after several test sales at stores and events, Tinley Beverage began implementing its retail commercialization strategy in December 2016. Currently the Hemplify functional beverage is being sold at more than 100 stores and online, and the number of stores continues to increase both in California and other new territories. As part of the Company’s growth strategy, new products are being launched along with territorial expansion, which should further provide it with additional avenues for revenue generation and growth. As Tinley Beverage accelerates its distribution strategy along with new product launches, revenues are expected to multiply over the coming quarters. At the current market price of $0.26, or a market cap of just ~$19.0 million, the Company’s shares do not reflect the potential growth in revenues and profitability over the next couple of years.
Related: 10 Reasons to Invest in Hemp and Hempco (TSXV: HEMP)
Investment thesis
- A premium producer and seller of CBD-infused beverages poised to generate multi-fold growth in revenues as it accelerates its retail distribution strategy
- Well positioned to capture the large and growing market for medical and recreational cannabis in California and other territories
Accelerating retail distribution strategy – Hempify now sold at over 100 stores and online
In June 2016, Tinley Beverage started a commercial bottling run for its Hemplify product and after several test sales at stores and events, the Company began implementing its retail commercialization strategy in December 2016. Since officially launching the first phase of retail channel test sales Hemplify drinks in August 2016 in a limited number of stores in Southern California and online on its store www.drinkhemplify.com and on Amazon, Tinley Beverage has continued to accelerate its commercialization for its CBD-infused functional drinks. By November 2016, Hemplify drinks test sales were available in over 100 stores, mainly in California and has also shipped to stores in Nevada, Washington, Colorado, North Carolina and Minnesota. In September 2016, Tinley Beverage entered into a distribution agreement with SF Pipes, a sales and distribution company based in the San Francisco Bay Area that has network of sub-distributors calling on ~1,000 stores in California and neighboring states. By December 2016, the Company began implementing its retail distribution strategy and received an initial purchase order from luckyvitamin.com, a leading online health and wellness store owned by GNC and Hemplify became available in Sprouts Chula Vista and Eastlake in San Diego County, California. Hemplify is a functional drink containing hemp CBD and fortified with nine times the electrolyte potassium of major sports drinks, Omega 3 and 9 vitamins.
New product launches and territorial expansion to support future growth
Tinley Beverage recently launched two new hemp products as part of its product expansion strategy. The Company launched Tinley ’27 and Tinley Cocktails cannabis drinks at the Cannabis Cup in San Bernardino, CA on the April “420” weekend and has recently hit the retail stores at scale. In June 2017, Tinley Beverage launched Hemp Extract Squeeze Supplement that contains product 55 10mg servings of phytoconstituent-rich hemp extract, coconut-derived MCT oil, lactose-reduced whey protein, premium raw cacao as well as terpenes. To be available in retail locations where the Company’s Hemplify hemp extract drinks are currently available and online at www.drinktinley.com, the squeeze supplement is also designed to be mixed with Tinley’s cannabis beverages to create chocolate rum and chocolate amaretto desserts and cocktails. In terms of a sales strategy, Tinley Beverage initially plans to focus on Hemplify and the new CBD squeeze supplement, followed by the Tinley ’27 and Tinley Cocktails THC products.
Tinley Beverage also plans to expand to other jurisdictions where drinkable cannabis products are permitted and has shortlisted Nevada, Washington, Oregon, Colorado, and Canada as initial target markets and the entry will be through partnerships. However California, the largest market for cannabis in North America, will be its core focus and partnerships in new territories will be entered upon achieving further scale in California.
Well positioned to capture large and growing market opportunity
Tinley’s operations are centered in California, North America’s largest cannabis and beverage markets. While the Company plans to capture the shift in consumer demand from sugary sodas to health drinks through its Hempify CBD functional beverages, the shift in demand from alcohol to cannabis drinks will be captured through Tinley 27 that mirror the alcohol experience with premium liquor and pre-mixed cocktail packaging.
Begins work towards permitting for recreational use: On July 12, 2017, Tinley Beverage announced that it has begun work towards permitting under California’s Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), which will be effective January 1, 2018. The recreational use will further expand the market opportunity for Tinley Beverage, which currently sells medical cannabis collective solely within California’s present medical system.
Financial analysis
Tinley Beverage began generating revenues only starting 3Q17. For 3Q17 and 4Q17, Tinley Beverage generated $6.9k and $5.7k, respectively. In 1Q17, revenues increased 181% QoQ to $15.9k on unit sales of 4,901 bottles. As the Company’s product commercialization gathers momentum, revenues are expected to grow multifold over the coming quarters. Its net loss was $2.3 million, or $0.49 per share, for full year 2016 and $348k, or $0.05 per share, for 1Q17. The Company’s liquidity position is decent with $4.1 million in cash as at May 30, 2017.
Tinley key financial metrics
Outlook
Previously a resource company, Tinley Beverage’s operating history in the emerging cannabis market is limited. As the Company accelerates its commercialization strategy and continues to expand its products within California and other territories, its financial performance would improve significantly over the coming quarters, which should drive the share price. At the current price of $0.27, or $19.0 million market cap, the share price of Tinley Beverage does not reflect the potential growth in its business over the coming quarters.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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