Positive momentum for the cannabis sector continued recently, as it received two major endorsements from mainstream sources: namely from Big Tobacco, and a major US exchange.
The first signal came when Cronos Group Inc. (NASDAQ: CRON) (TSX.V: MJN) officially began trading on the Nasdaq stock exchange, under the trading ticker symbol “CRON”—becoming the first ever cannabis company to do so.
Already trading on the TSX Venture exchange, the Cronos Nasdaq approval could open the door to other Canadian cannabis companies, including fellow TSX.V listed Aurora Cannabis Inc. (TSXV: ACB) (OTC: ACBFF), big board TSX-listed Canopy Growth Inc. (TSX: WEED) (OTC: TWMJF), or Canadian Stock Exchange traded MYM Nutraceuticals Inc. (CSE: MYM) (OTC: MYMMF).
The Nasdaq announcement was followed by the revelation that midsize U.S. tobacco company Alliance One International, Inc. (NYSE: AOI) had “acquired majority stakes in two new joint ventures” according to its latest quarterly report. Through a subsidiary, Alliance One had indeed secured a 75% stake in Canada’s Island Garden Inc. and an 80% stake in Goldleaf Pharm Inc.—both representing a combined 1 million square feet of cannabis production space.
By combining the market signals of both the Nasdaq approval, and the thumbs up from Big Tobacco, it appears that the brief panic that followed US Attorney General Jeff Sessions’s crackdown on previously lenient federal marijuana laws is over—Legal cannabis is going mainstream, and the market is in favour.
In the coming months as Canada legalizes marijuana nationally, and the EU begins to ease up on restrictions on medical marijuana, the benefits will likely roll out to cannabis companies of all sizes, including Alliance One International, Inc. (NYSE: AOI), Cronos Group Inc. (NASDAQ: CRON) (TSX.V: MJN), Aurora Cannabis Inc. (TSXV: ACB) (OTC: ACBFF), Canopy Growth Inc. (TSX: WEED) (OTC: TWMJF), and MYM Nutraceuticals Inc. (CSE: MYM) (OTC: MYMMF).
With $22.6 billion market projected in Canada alone, the legal cannabis sector has only started to heat up.
MAINSTREAM CANNABIS ACCEPTANCE
Prior to the Cronos listing on the Nasdaq, US traders wanting to invest in the cannabis sector were relegated to the OTC. And in Canada, there was a scare a few months back regarding Canadian cannabis stocks with any dealings in the USA, under the threat of being delisted.
The current momentum has put all the focus on Canada, the EU, Australia, and even Latin America.
“All eyes are on Canada right now, not only for what’s coming (with recreational legalization), but also because Canada has basically defined the standards on how to do a medical cannabis industry,” said Pierre Debs, managing director of Spektrum Cannabis GmbH—a German subsidiary of Canopy Growth Inc.—in an interview with Financial Post.
However, acceptance in the United States is still ramping up.
The public in places like Nevada, where in just the first 6 months of legalization, saw an influx of an additional $30 million into the public coffers—lending more positivity to the general level of acceptance.
So while it’s Canada that is moving full-steam ahead on lifting prohibition on cannabis sales, the likeliest scenario is one where companies make the bulk of their incomes abroad.
“When you step back and look at sheer numbers and population … it is unrealistic to believe that (Canada) would be more than 25 per cent (of Cronos’ business), once we go over three years,” said Mike Gorenstein, Cronos’ chief executive told Financial Post.
While groups such as Cronos break the barrier with the first major US listing, it’ll be interesting to see which others can make that same jump.
One company that could make the jump from the Canadian Stock Exchange to a big board in the coming months is mid-tier MYM Nutraceuticals Inc., which has strategically set itself up on three continents: Canada (North America), Australia, and Colombia (South America).
Pretty soon, the mainstream markets will take notice that MYM is taking part in something quite big.
MYM’S INTERNATIONAL APPROACH
In Canada, MYM has two significant projects in the province of Quebec, including the massive 1.5 million-square-foot state-of-the-art facility in the municipality of Weedon. Abroad, through a joint venture on a 1.2 million-square-foot facility in New South Wales, Australia, and another project in Colombia that could turn into one of the largest cultivation sites in the world, MYM Nutraceuticals is truly on the international stage.
The company’s most recent agreement in Colomvia took MYM into Latin America—Officially putting the MYM mark on three different continents.
Through a strategic deal with leading Colombian medical cannabis company NEWCANNA, Colombia represented their second Southern-Hemisphere operation.
In Colombia, MYM set itself up in a low-cost production environment, with a massive growing space available. Across the agreed-upon acreage, indigenous growers currently have a production capacity of approximately 217,500 kg of high-grade cannabis for processing and export worldwide.
With the expectation of advanced improvements that MYM and its partners can provide, production on the 7,400 acres total of cultivation property is projected to surpass 1,000,000 kg of cannabis within the next two years.
Even its climate-controlled Quebec facilities, with their economically-advantageous productions costs (by North American standards) won’t be as low as those found in Colombia. MYM sees the high mountains of Colombia as a perfect climate to cultivate cannabis, which coupled with lower power and labour costs, will ultimately lead to a lower bottom line cost.
MYM Nutraceuticals sees its future profits coming not only from raw materials and plants, but through its state-of-the-art Weedon facility the company seeks to further develop out its own brands and products beyond just the plant matter.
Along with its multiple partners want to transform raw cannabis materials into medicinal oils, tinctures and a variety of products. Given their international presence, high-cultivation capacities, low-cost production projections, and willingness to expand the utility of cannabinoid matter into new products to be exported around the world, MYM Nutraceuticals has a good shot at being a mainstream name on a big board in the not-so-distant future.
POTENTIAL COMPARABLES
Alliance One International, Inc. (NYSE: AOI)
Alliance One purchases, processes, packs, stores, and ships leaf tobacco for manufacturers of cigarettes and other consumer tobacco products worldwide. It operates through North America and Other Regions segments. The company is involved in processing and selling flue-cured, burley, and oriental tobaccos that are used in international brand cigarettes. It also provides agronomy services for growing leaf tobacco. The company was founded in 1904 and is headquartered in Morrisville, North Carolina.
Aurora Cannabis (TSXV: ACB) (OTC: ACBFF)
Aurora Cannabis boasts the second highest square footage approved for cannabis production in Canada. Together with its subsidiaries, Aurora produces and distributes medical marijuana products in Canada. The company’s products consist of dried cannabis and cannabis oil.
Aurora is the only cannabis producer located in the province of Alberta, giving the company a cost advantage through its free use of fresh mountain-fed water used on site, and housed under the lowest corporate tax rates and power rates in Canada. Capitalizing on numerous farm credit programs provided by the province, Aurora has positioned itself as arguably the lowest cost-per-gram licensed producer in Canada. Aurora became a licensed producer in 2015, and is based in Edmonton, Alberta.
Canopy Growth Inc. (TSX: WEED) (OTC: TWMJF)
Owners of the Tweed brand of cannabis products, Canopy Growth is a multi-licensed, geographically diverse marijuana producer, described as “one of the world’s — and Canada’s first — premier exporters of marijuana” by the Financial Post in 2016. Canopy currently has a combined growing platform of over 665,000 sq. ft. of production space. It was also the first federally regulated, publicly traded cannabis producer in North America, and the first billion-dollar cannabis corporation. Canopy Growth was founded in 2014, and is based in Smith Falls, Ontario.
Cronos Group Inc. (NASDAQ: CRON) (TSX.V: MJN)
Cronos Group is a principal investment firm that seeks to invest in companies either licensed, or actively seeking a license, to produce medical marijuana pursuant to Canada's Marihuana for Medical Purposes Regulations (MMPR). The firm typically invests in companies based in Canada, and is primarily an equity investor, may also advance debt as appropriate. It seeks to make minority investments with appropriate governance and shareholder rights. Cronos Group was incorporated in January, 2013 and is based in Toronto, Canada.
For a more in-depth look into MYM Nutraceuticals you can view the in-depth report at Canada News Group: http://canadanewsgroup.com/2018/02/05/the-best-stock-market-sector-in-2018/
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