Shares of Emerald Health Therapeutics Inc. (CVE:EMH) have climbed 43% during the past four days on a Health Canada review and sector M&A activity
SmallCapPower | November 15, 2017: Emerald Health Therapeutics Inc. (TSXV:EMH) announced on Monday that its licensed producer application for the Pure Sunfarms Delta 3 greenhouse facility received positive review from Health Canada’s Office of Medical Cannabis. The news sent the stock price of Emerald Health Therapeutics surging 21% on Monday and its share price has risen about 43% during the past four trading sessions as sector takeover speculation in Canada intensifies following the unsolicited offer by Aurora Cannabis (TSX:ACB) for CanniMed Therapeutics Inc. (TSX:CMED), as well as CanniMed’s desire to acquire Newstrike Resources Ltd. (TSXV:HIP).
For Our Complete Coverage Of Canadian Marijuana Stocks Click Here
Emerald Health Therapeutics, through its wholly-owned subsidiary, Emerald Health Botanicals Inc., currently produces cannabis from the indoor facility in Victoria, BC, and is aggressively planning to expand its production capacity for the legalized adult use market in July 2018, through two production sites –the Pure Sunfarms Facility and a 150,000 sq.ft. property in Richmond, part of Metro Vancouver, B.C. The Company had filed an application to Health Canada for its Pure Sunfarms’ in September while the application for the Richmond facility was filed in October. Additionally, in early October, Emerald Health Therapeutics expanded the current producing facility to an additional 7,000 sq ft.
The next step for receiving a cultivation license for the Pure Sunfarms facility is to submit written and visual evidence, upon completion of conversion of the facility. Emerald Health Therapeutics expects the completion of the first quadrant (250,000) of the 1.1 million square foot Delta 3 greenhouse and submission of the confirmation of readiness documentation to Health Canada in February 2018.
Once complete, the 1.1 million-square foot (25-acre) Pure Sunfarms facility can produce up to 75,000 kg of cannabis per year in 2020. Including the options Pure Sunfarms has to acquire from Village Farms two additional greenhouses with 3.7 million square feet, the production could potentially yield an additional 225,000 kg of cannabis annually. Pure Sunfarms ranks among the largest cannabis facilities in Canada, behind the Aurora Cannabis Aurora Sky 800,000 facility, which is expected to yield ~100,000 kgs annually.
Given the large expected increase in production capacity of Emerald Health Therapeutics in 2018 and beyond, reaching 42,000 kgs (35k from Pure Farms partnership and the rest from its own facilities) per year by 2020, the current market cap of $210 million looks undervalued compared to the top three (WEED, ACB, APH) cannabis players that each trade well above $1.5 billion market cap.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.
To read our full disclosure, please click on the button below:
