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Alliance Growers Is A Diverse Cannabis Play Trading At A Steep Discount

Jul 31, 2018 • 10:45 AM EDT
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4 MIN READ  •  By Michael Berger
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The Canadian marijuana market has been a hot opportunity for investors and we do not expect this trend to change as the recreational market will open on October 17th. The recreational marijuana market will be a catalyst for many Canadian cannabis businesses and investors need to keep an eye on this opportunity.

We have been keeping a close watch on the sector and came across a company worth mentioning. The company, Alliance Growers has an attractive operating structure and is comprised of four divisions.

We are favorable on this structure as it will help create value for the entire business as the management team executes on previously announced initiatives. Alliance Growers has already acquired interests in two ACMPR applicants and is working to create value through its other businesses.

Secures Strategic Partner for Biotech Division

With its partner  Pharmagreen Biotech Inc. (“Pharmagreen”), Alliance Growers Corp is establishing the first in a series of Cannabis Biotech Complexes with additional industrial scale greenhouses built in Mission, BC. Pharmagreen has already purchased the land upon which the proposed Cannabis Biotech Complex will be built in Mission, BC.

Pharmagreen’s subsidiary will build and operate the cannabis biotech complex and Alliance entered a binding letter of intent to acquire an equity stake in this company. The purpose of these facilities is to supply licensed cannabis growers with high quality ready-to-grow starter crops that are produced using a proprietary in-vitro Chibafreen Process.

The facility will be a 58,000 square foot, semi-automated, fully finished, facility. A greenhouse will be part of the layout, allowing the facility to operate as a year-round nursery for the newly cultured cannabis crop.

Acquired Interests in Two ACMPR Applicants

One of the most exciting aspects of the Alliance Growers story is Biocannatech, which is in the final stage of Health Canada’s Access to Cannabis for Medical Purposes Regulations (ACMPR) application process for the production and sale of medical marijuana.

Biocannatech expects to generate $5 million a year in revenue from its 10,000 square foot facility in Mont-Royal, Québec. The company is focused on increasing production capacity and is in discussions to lease an adjacent facility, which is 17,900 square feet with a growing area of 16,000 square feet. We are bullish on this growth initiative as it is expected to generate approx. $12 million in annual revenues.

The Biocannatech facility is expected to be producing product by late fall with full production in 2019. The adjacent property could be set up and operational in 2019 pending necessary approvals. Alliance Growers will supply financing and resources to build out the medical marijuana facility. Once Health Canada is satisfied with a successful crop, Alliance Growers will be granted its sales license.

Earlier this year, Alliance Growers acquired 5% of New Maple Holdings, the parent company of Canwe Growers, a private Ontario-based company that is in the middle of the ACMPR application process. Canwe has access to a 22-acre property and plans to build a facility focused on producing premium quality cannabis. The company has amassed a qualified team which includes licensed producer MedReleaf Corp.’s former Head Grower Jack Yu, an expert cannabis grower well-versed in the cultivation of cannabis from seed to sale.

In January, Canwe completed Health Canada’s security clearance stage and entered the final review stage of the application process. The company has retained an experienced project management firm to oversee the design and build of its production facility and is projected to be licensed and operational by early 2019.

Alliance Growers is focused on this burgeoning market and will continue seeking further strategic investment opportunities in additional ACMPR companies to secure sales and CBD offtake agreements. We are monitoring how the company continues to execute and works to create value.

A Stock to Watch

Over the last month, Alliance Growers has been under considerable pressure and we are monitoring the shares for a bottom. 2018 has been a rough year for the company and we are monitoring the decline.

With a market cap that is below $15 million, the company trades at a very cheap valuation and we are monitoring how the shares trade from here. We are favorable on the multi-faceted growth initiatives and are watching how construction on the Biocannatech facility goes. 

The Canadian medical and recreational marijuana opportunity is significant, and we are favorable on Alliance Grower’s leverage to it. Although the management team has ways to go before it is fully licensed by Health Canada, this is something to watch.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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