Today we have identified some Canadian marijuana stocks that make tempting acquisition targets for companies looking to scale up quickly
SmallCapPower | October 16, 2018: As sales numbers start rolling in, cannabis companies will need to generate significant cash flows that are necessary to sustain their current stretched valuations. Due to a surplus of licensed producers in Canada, it is possible the country may be flooded with supply of cannabis products a few years down the road. This may drive down margins as companies lower prices in order to stay competitive. The Canadian marijuana stocks we’ve weeded out today may be targeted for acquisitions as the larger players seek to broaden their brand portfolios.
HEXO Corp. (TSX:HEXO) – $8.49
HEXO 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. The Company is the only licensed producer of the Decarb product line, a powder medical marijuana that offers consumers a safe and easy way to consume cannabis. On October 4, 2018, HEXO announced the closing of a joint venture transaction with Molson Coors Canada to identify opportunities in the cannabis-infused beverages market.
Organigram Holdings Inc. (TSXV:OGI) – $7.50
Organigram Holdings is an efficient producer of premium cannabis products. Leveraging its strategic location in New Brunswick along with efficient use of cultivation technologies, the Company produces quality products at industry-leading yields. With production expected to reach 36,000 kgs annually in the near term, Organigram is well positioned to serve both the medical and recreational markets. StoneCastle Investment Management Portfolio Manager Bruce Campbell, in an interview with SmallCapPower, asserted that Organigram is the dominant player on Canada’s East Coast. On October 10, 2018, the Company announced that its medical cannabis plants had been certified organic by Ecocert, a large global organic certification company.
Khiron Life Sciences Corp. (TSXV:KHRN) – $1.80
Khiron Life Sciences is a Canadian medical cannabis company with operations in Colombia. The Company is focused on scientific and medical-based research applications for cannabis. Khiron estimates a potential market of 6M for patients in Colombia, with the intention of targeting an estimated 68M patients throughout Latin America upon future expansion. In 2017, Khiron was granted cultivation and production licenses in Colombia for both low and high THC strains. The Company intends to open its first clinics in Q4/2018. On October 2, 2018, Khiron announced multi-channel Columbian distribution agreements for Kuida, its CBD-based skincare brand. The agreements give Khiron access to Columbia’s US$5.6 Billion skincare industry.
CannTrust Holdings Inc. (TSX:TRST) – $13.90
CannTrust Holdings is a Canada-based company that produces and distributes medical cannabis products. Products include dried cannabis, oil extracts, capsules, drops, and topicals. Its Cannabis Vegan Capsules are currently approved for sale, available in 10mg doses containing CBD or THC. Projected production capacity for 2019 is in excess of 100,000 kg, with expected cost per gram to be $0.75/gram. The Company operates three brands targeted at the recreational market: liiv, for experienced users, Synr.G, for social use, and Xscape, an experimental focused brand. The Company is also positioned to produce edibles should regulation allow it.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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