This Thursday morning in marijuana brings us one major cannabis retailer’s plan to fund a major expansion, another retailer expanding one licensed location at a time, a large cultivator achieving coast-to-coast distribution and another cultivator receiving an extremely rosy outlook from some new analyst coverage
– Jameson Berkow
Cannabis Professional’s daily recap of industry news. View archive here.
Table of contents National Access Cannabis could raise up to $200-million: filing • Organigram hits coast-to-coast distribution • Fire & Flower wins 19th cannabis retail license • Eight Capital initiates coverage of 48 North with ambitious target
National Access Cannabis could raise up to $200-million: filing
Canada’s largest chain of legal cannabis stores filed a base shelf prospectus on Wednesday that could be the first step towards National Access Cannabis raising as much as $200-million in expansion capital. The filing does not guarantee any money will be raised at all, rather, it enables the company to prepare further documentation to offer common shares, preferred shares, subscription receipts, warrants, debt securities, or any combination within two years of filing the final version of the prospectus. The company has 28 locations under its Meta and NewLeaf brand names and is aiming to open another 82 stores for a total of 110 across Canada before the end of 2020. National Access is also already profitable. In its most recent quarter (Q2 of 2019 reported in mid-April), National Access reported $1.8-million in earnings before interest, depreciation, taxes and amortization (EBIDTA) on total revenue of $16-million.
Organigram hits coast-to-coast distribution with first Quebec shipment
New Brunswick-based cannabis producer Organigram has completed its first shipment to the province of Quebec, the company announced Thursday, officially giving the its Edison brand of recreational cannabis a presence in all 10 Canadian provinces. Organigram did not disclose the size of the shipment, though the company also did not disclose the size of its supply deal with the provincially-owned retailer Société québécoise du cannabis (SQDC) when it was first announced in February either. Supplying the Quebec market is more complicated than working in other provinces as a unique feature of the market is producers must first win approval from the financial regulator Autorité des Marchés Publics. Organigram joins a small group of cultivators with access to every Canadian province that includes some of the sector’s largest players such as Canopy Growth, Aurora and Aphria. The company plans to roughly triple its production capacity by the end of this year to more than 110,000kg annually.
Fire & Flower wins 19th cannabis retail license
Residents of southern Calgary are about to get another place to buy recreational cannabis. Edmonton-based Fire & Flower announced Thursday that a second Calgary location - located at 7108 MacLeod Trail - has been granted a license from the Alberta Gaming, Liquor and Cannabis Commission (AGLC) to begin recreational cannabis sales, marking the 19th licensed store in the company’s branded network. The location has been open since January, but has only been selling cannabis accessories. With the provincial license now in hand, the company expects cannabis sales begin from that location during the week of July 8th. There are actually a total of 21 Fire & Flower-branded stores open across Canada right now. However, the two locations open in Ontario are technically owned independently by provincial lottery winners and two other locations in Alberta - in Strathmore and Calgary’s Stanley Park neighbourhood - continue to operate on an accessories-only model. Last month, the AGLC lifted a months-long moratorium on issuing new cannabis retail licenses and has since been issuing five every week. Last week, Fire & Flower announced it will pursue same day deliveries in Saskatchewan, which is one of only two provinces (the other being Manitoba) where private companies are allowed to offer such e-commerce services.
Eight Capital initiates coverage of 48 North with ambitious target
Analysts at Eight Capital are expecting big things from the folks at 48 North. Initiating coverage as of Thursday with a Buy rating and a $1.40 per share price target, Eight Capital is expecting shares of the company, which trade on the TSX Venture Exchange under the ticker NRTH and closed Wednesday at $0.80, to be worth 75 per cent more one full year from today. “We believe a premium multiple is justified given NRTH’s brand presence and low-cost cultivation,” analyst Jenny Wang wrote in a note to clients explaining the coverage decision. The company has distribution agreements with provincial wholesalers in Alberta, Ontario and Quebec and earlier this month completed planting roughly 200,000 feminized seeds at its 100-acre outdoor cultivation facility in Ontario as one of the first Canadian cannabis producers to be licensed for outdoor growing. The cost of outdoor cultivation is expected to be approximately $0.25 per gram or just 30 per cent of the costs borne by greenhouse growing, which Ms. Wang wrote “allows for margin protection as cannabis becomes increasingly commoditized.” 48 North’s total supply agreements should generate about $50-million in annual revenue, Ms. Wang wrote, assuming a $4-per-gram price point, though she also noted the company’s focus on organic production “may allow for a premium price point.”
Jameson Berkow