The Canadian cannabis stocks we’ve weeded out have solid cash and inventory balances going into 2019
SmallCapPower | December 19, 2018: Today, we have identified six Canadian cannabis stocks with strong balance sheets going into 2019. In 2019, in general, cannabis companies will need cash to expand production facilities to meet consumer demand, as well as to make strategic acquisitions to increase market share and/or to become further vertically integrated (seed to sale). These companies also have a solid inventory position, which is another important metric for 2019.
Share Prices are as at Friday December 14, 2018.
Balance sheet data is as of the latest quarterly filing.
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Organigram Holdings Inc. (TSXV:OGI) – $4.88
Cannabis
Organigram is a Canada-based marijuana producer operating in New Brunswick. The Company currently produces 22,000 kg/year out of its 134,000 sq. ft. facility. OGI plans to expand this facility, increasing production to 65,500 kg by April 2019 and 113,000 kg by April 2020. The Company has also secured supply deals with each province except Quebec. In addition, they have also announced the following strategic acquisitions: a $5 million investment in Hyasynth Biologicals, $2.5 million investment in Alpha-Cannabis Germany, and a $5 million investment Eviana Health Corporation. In its most recent annual report (FY ending 31-Aug-2018), OGI reported cash costs per gram of $0.83 and record revenues of $3.2M, a 76% increase YoY.
- Market Cap: $632.2 million
- YTD Total Return: 19%
- Cash + Short Term Investments: $130.0 million
- Inventory: $64.8 million
- Net working capital: $23.1 million
- Average Daily Volume – 30 Days: 750,060
CannTrust Holdings Inc. (TSX:TRST) – $7.33
Cannabis
CannTrust is a Canada-based licensed producer of medical cannabis. The Company’s original 60,000 square foot production facility, located in Vaughan, Ontario, produces 3,600 kg annually. CannTrust also intends to build a 450,000 sq. ft. facility in the Niagara region to increase growing capacity with an anticipated completion in 2019. In October, the Company announced a strategic partnership with Cannatrek Ltd, an Australian licensed cannabis producer, to expand the Company’s global reach to the Australian and Asian markets. CannaTrust will invest $6M for 19.8% ownership of Cannatrek. On November 14, 2018, the Company announced record revenue for Q3/2018 of 12.6M, representing 105% YoY growth.
- Market Cap: $772.4 million
- YTD Total Return: -20%
- Cash + Short Term Investments: $86.3 million
- Inventory: $58.5 million
- Net working capital: $59.1 million
- Average Daily Volume – 30 Days: 1,339,390
HEXO Corp. (TSX:HEXO) – $4.95
Cannabis
HEXO is a Canadian cannabis producer, operating a 50,000 sq. ft. grow facility in Gatineau, Quebec. Current operations produce 3,600 kg of cannabis per year. The Company is the only licensed producer of the Decarb product line, a finely-milled powdered medical marijuana that is designed for oral consumption. On September 10, 2018, HEXO acquired interests in a 2M sq. ft. facility in Belleville, Ontario as part of its national expansion strategy. The facility will be used as a R&D and manufacturing centre. On December 13, 2018, HEXO reported FY2019 Q1 revenues of $5.2M for recreational adult use cannabis during the first two weeks of legalization (Oct17-31). During the same period, the Company sold 1,110 kg of cannabis at an average price of $5.5 in the recreational adult-use market and $9.1 for the medical market.
- Market Cap: $982.9 million
- YTD Total Return: 21%
- Cash + Short Term Investments: $182.4 million
- Inventory: $18.9 million
- Net working capital: $44.5 million
- Average Daily Volume – 30 Days: 2,333,630
The Supreme Cannabis Company Inc. (TSXV:FIRE) – $1.44
Cannabis
The Supreme Cannabis Company is a Canada-based licensed producer of medical marijuana. The Company’s primary asset is 7ACRES, which currently operates a 40,000 sq. ft. facility that produces 13,330 kg of cannabis per year. The Company is also developing a 342,000 sq. ft. facility at 7ACRES that anticipates 50,000 kg of annual production. On September 26, 2018, the Company announced a supply agreement with Tilray Inc. (NASDAQ:TLRY) to provide dried cannabis in a deal estimated to be worth $12 million. Supreme Cannabis recently completed a $100M bought deal comprised of 6% senior unsecured convertible debentures at an issue price of $1,000 per debenture. The debentures will mature in October 2021 and are convertible at $2.45 per common share at any time prior to maturity. The Company may force conversion with at least 30 days notice should the VWAP be greater than $3.43 for any 10 consecutive trading days.
- Market Cap: $409.0 million
- YTD Total Return: -37%
- Cash + Short Term Investments: $31.2 million
- Inventory: $9.6 million
- Net working capital: $-1.3 million
- Average Daily Volume – 30 Days: 942,640
The Green Organic Dutchman Holdings Ltd. (TSX:TGOD) – $2.95
Cannabis
Green Organic Dutchman Holdings is a Canada-based cannabis producer with operations in Ontario and Quebec. TGOD aims to be the lowest cost producer in Canada by accessing the lowest power rates in Ontario and Quebec. The combined production capacity of the two facilities totaling 970,000 sq. ft. is expected to be 116,000 kg of cannabis flower.
- Market Cap: $793.3 million
- YTD Total Return: 0%
- Cash + Short Term Investments: $207.6 million
- Inventory: $0.5 million
- Net working capital: $47.6 million
- Average Daily Volume – 30 Days: 2,363,460
TILT Holdings Inc. (CSE:TILT) – $2.00
TILT is a holding company focused on cannabis technologies. Portfolio companies include: Baker Technologies “the Salesforce of Cannabis,” which is the cannabis industry’s leading CRM software for dispensaries with a 32% market share; Briteside Holdings “the Uber Eats of Cannabis,” which provides a platform for cannabis delivery services. To date, Briteside transports an average of US$30M cannabis every month; Sante Veritas Holdings (SVT) is a licensed producer based in British Columbia. SVT is expected to have its 40,000 sq. ft facility operational upon receipt of its cultivation license from Health Canada (expected late 2018); and Sea Hunter Holdings, which is a business solutions and financing provider for dispensaries and cultivators.
- Market Cap: $509.3 million
- YTD Total Return: N/A
- Cash + Short Term Investments: $134.5 million
- Inventory: $2.3 million
- Net working capital: $0.6 million
- Average Daily Volume – 30 Days: 821,990
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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