Organigram Holdings Inc. (CVE:OGI) is set to supply the Province with at least five million grams of recreational marijuana per year
SmallCapPower | September 18, 2017: Organigram Holdings Inc. (TSXV: OGI) Friday announced that it has entered into a Memorandum of Understanding (MOU) with the New Brunswick provincial authority for the distribution of marijuana to the adult-use recreational market when adult-use marijuana is legalized next summer.
As per the MOU, Organigram will supply at least five million grams of recreational marijuana per year to Government of New Brunswick. The cannabis is estimated to have a retail value between $40 million to $60 million per year and represents ~25% of the Company’s anticipated annual production. This agreement will act as a positive catalyst for the revenue growth in the coming years when the marijuana use gets legalized for recreational use.
Organigram Holdings’ CEO Greg Engel said, “We are excited to enter into this MOU with the Province. The Government of New Brunswick has established itself as a leader in the developing marijuana industry, working to ensure that the industry develops in a responsible and effective manner. New Brunswick’s stewardship on this file has been recognized throughout Canada and we are proud to work closely and support them as a strategic partner.”
Going forward, Organigram has a great opportunity to build a strong and successful cannabis market within the province and beyond. The MOU is one of the first in Canada. This is the result of positive, productive and ongoing consultation between the Government of New Brunswick and Organigram.
Post the announcement, Organigram’s shares surged 17% to close at $2.65 on September 15, 2017. Its stock price has jumped more than 24% during the past month. Organigram currently trades at TTM price to sales value of 40.34x and price to book of 2.82x.
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.
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