The Canadian marijuana stocks on list are evaluated on oil sales and gross margins
SmallCapPower | June 21, 2018: Bill C-45, the marijuana legalization bill, has passed the Senate by a vote of 52-29, and now only requires royal assent before becoming law. Canadians are expected to be able to legally consume recreational cannabis within 8-12 weeks. The Canadian marijuana stocks we have identified today could continue to see strong returns as investor interest in the sector renews and their prospective market expands. We examine the top Canadian producers by their gross margin and oil sales, as oil sales represent a high-margin expanding area within the sector.
Canopy Growth Corp. (TSX:WEED) – $42.53
Canopy Growth Corporation is the largest cannabis Company listed by market cap on the TSX and NYSE. To position itself in the Canada’s recreational market, the Company has secured agreements with the Provinces of Quebec, Prince Edwards Island, New Brunswick, and Newfoundland & Labrador to supply their adult consumer market with high-quality cannabis. The Company has the largest licensed production platform in Canada, with over 600,000 sq. ft. of production space. To further solidify their leading position in the market, the Company expects to have up to an additional 5,000,000 sq. ft. of production over the next 12 months. The Company has also acquired the necessary agreements to export medicinal cannabis to Australia, Brazil and Germany. On June 20, the Company completed a $500M convertible senior notes offering.
- Market Cap: $8,537.3M
- Revenue Last Reported: $21.7M
- Grams Sold Last Reported: 2,330,000
- Gross Margin Last Reported: 57.8%
- Oil Sales as % of Cannabis Sales: 23.0%
- 1 Week Total Return: 10.3%
- 1 Month Total Return: 18.0%
Aurora Cannabis Inc. (TSX:ACB) – $9.54
Aurora Cannabis is a licensed producer and distributor of medical cannabis. ACB expects to have just under 1,000,000 sq. ft. of licensed production space and plans to produce at least 270,000 kilograms of cannabis annually. The Company also has 20% ownership interest in Liquor Stores N.A., the dominant alcohol retail chain in Western Canada. It intends to convert several existing outlets, as well as develop new stores, for the sale of cannabis to the recreational market. Additionally, the Company has signed a supplier agreement with the Province of Québec to supply cannabis for the province’s adult consumer market. Aurora has also embarked on an aggressive international expansion strategy that aims to have operations and/or sales in Germany, Denmark, Italy and Australia. On May 14, 2018, the Company announced the acquisition of MedReleaf (TSX:LEAF) for $3.2B in stock. On June 20, 2018, the Company announced its plan to spin-off its U.S. assets into a new company, Australis Capital.
- Market Cap: $5,356.9M
- Revenue Last Reported: $16.1M
- Grams Sold Last Reported: 1,352,982
- Gross Margin Last Reported: 31.7%
- Oil Sales as % of Cannabis Sales: 20.1%
- 1 Week Total Return: 7.7%
- 1 Month Total Return: 20.5%
Aphria Inc. (TSX:APH) – $11.94
Aphria is Canada’s third-largest cannabis producer by licensed capacity. The Company’s Leamington greenhouse facility provides them with the opportunity to be a scalable, low-cost producer of medical marijuana. By January 2019, Aphria expects to increase its total licensed greenhouse growing space to 1,000,000 sq. ft., increasing its annual production capacity from 9,000 kilograms to 100,000 kilograms. The Company currently has 44,000 sq. ft. of production space. On June 6, 2018, the Company announced the construction of a $55M cannabis extraction centre, expected to process 200,000kg/y. On the same day, APH announced a $225M private placement at $11.85/share.
- Market Cap: $2,524.9M
- Revenue Last Reported: $10.3M
- Grams Sold Last Reported: 1,428,100
- Gross Margin Last Reported: 77.1%
- Oil Sales as % of Cannabis Sales: 33.1%
- 1 Week Total Return: 3.9%
- 1 Month Total Return: -2.6%
Cronos Group Inc. (TSX:CRON) – $9.11
Cronos Group owns and operates two licensed producers of medical marijuana in Canada: Peace Naturals (medical) and In The Zone (recreational). The Company also actively seeks investment opportunities in companies that are licensed under the ACMPR or that are actively seeking a license. In addition, Cronos plans to ramp up production at its Peace Naturals facility from the existing 5,000 kg to 40,000 kg before 2019. Of note, the Company formed a partnership with Israeli entity, Gan Shmuel, to set up a low-cost production facility in Israel. The proposed facility is expected to produce 24,000 kg/year.
- Market Cap: $1,615.4M
- Revenue Last Reported: $2.9M
- Grams Sold Last Reported: 501,000
- Gross Margin Last Reported: -85.9%
- Oil Sales as % of Cannabis Sales: 29.0%
- 1 Week Total Return: 3.8%
- 1 Month Total Return: 13.7%
Hydropothecary Corp. (TSXV:THCX) – $5.04
Hydropothecary is a Canadian cannabis producer, operating a 50,000 sq. ft. grow facility in Quebec. The Company differentiates itself through its commitment to natural growth techniques and a focus on customer service. Current operations produce 3,600 kg of cannabis per year. In October 2017, construction began on a new 250,000 sq. ft. facility, anticipated to be operational by summer 2018. A second greenhouse construction project is expected to add an additional 1M sq. ft., scheduled to be completed by December 2018. With both new greenhouses operational, the Company expects to be able produce 108,000 kg of cannabis per year.
- Market Cap: $966.4M
- Revenue Last Reported: $1.2M
- Grams Sold Last Reported: 131,501
- Gross Margin Last Reported: -25.4%
- Oil Sales as % of Cannabis Sales: 2.8% – estimated from dried grams sold/total gram equivalent
- 1 Week Total Return: 1.4%
- 1 Month Total Return: -1.2%
CannTrust Holdings Inc. (TSX:TRST) – $8.77
CannTrust is a Canada-based licensed producer of medical cannabis. The Company’s products are sold online and delivered to registered patients. CannTrust’s original 60,000 square foot production facility located in Vaughan, Ontario uses hydroponic technology to produce at 3,600 kg annually. CannTrust has also set aside a 46-acre property, where it intends to build a 450,000 sq. ft. facility to increase growing capacity with an anticipated completion date in mid-2018.
- Market Cap: $916.0M
- Revenue Last Reported: $7.8M
- Grams Sold Last Reported: 982,269
- Gross Margin Last Reported: 61.9%
- Oil Sales as % of Cannabis Sales: 60.0%
- 1 Week Total Return: 9.5%
- 1 Month Total Return: 0.2%
Organigram Holdings Inc. (TSXV:OGI) – $5.45
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 signed Memorandums of Understanding with New Brunswick and Prince Edward Island to supply cannabis to the recreational market.
- Market Cap: $679.3M
- Revenue Last Reported: $3.7M
- Grams Sold Last Reported: 237,650
- Gross Margin Last Reported: 58.0%
- Oil Sales as % of Cannabis Sales: 15.8%
- 1 Week Total Return: -1.6%
- 1 Month Total Return: 13.5%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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