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Cannabis Oil: A Key Growth Driver For Canadian LP’s

Jul 13, 2017 • 10:59 AM EDT
4 MIN READ  •  By Michael Berger
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Canadian licensed medical cannabis producers traded significantly higher yesterday on the heels of a strong fourth quarter earnings report from Aphria Inc. (APH.TO) (APHQF).

Aphria closed out the 2017 fiscal year by generating $2.8 million in EBITDA in the fourth quarter, a 181% increase when compared to the prior quarter. The 2017 fiscal year was a banner year for Aphria and we expect 2018 to be even more significant.

The greenhouse cannabis producer reported several milestones in the fourth quarter and we expect these events to help support continued growth. During the quarter, the company:

  • Expanded its presence in the United States and entered Florida
  • Increased its investment in and membership units in Copperstate Farms Investors
  • Health Canada approved its Part II expansion and Aphria increased its annual production capacity expectations for Part II, Part III, and Part IV expansions
  • Raised $105+ million through a bought deal and debt financing

During the last quarter, shares of Aphria has fallen approx. 25% and we see significant upside to current levels. We expect to see Aphria report significant revenue growth over the coming year and our only concerns stem from potential weather issues.

Aphria is well positioned to capitalize on Canada’s medical cannabis sector as well as the proposed legal recreational market, expected to be implemented by July 2018, and we are favorable on its long-term outlook.

Revenue from Cannabis Oil Continues to Increase

Cannabis oil has already become a significant revenue stream for licensed producers in Canada and this is a trend we expect to continue for the foreseeable future. Cannabis oil represents a fantastic opportunity and solution for licensed producers.

The opportunity is great because not only does the product generate more revenue for the company but it also has higher margins. Cannabis oil is also a great solution when a licensed producer has too much dried cannabis product. The process of turning dried product into oil increases the shelf life of medical cannabis.

Aphria received its license to sell medical cannabis oil in August 2016 and subsequently began to sell cannabis oils to its registered patients. Currently, Aphria has capacity to produce up to 1,200 bottles (60mL per bottle) per day. During the fourth quarter, cannabis oil represented 32% of all Aphria’s revenue.

Licensed medical cannabis producer CanniMed Therapeutics Inc. (CMED.TO) (CMMDF) started selling cannabis oil in the first quarter of 2016. In June, the company said that cannabis oil accounts for almost 50% of total revenues for its current quarter.

Canopy Growth (WEED.TO) (TWMJF) also recently reported to have invested in an industrial cannabis oil extraction system (now operational) that can produce as much oil in approximately one month as it has produced since it started extracting cannabis oil in November 2015.

An Industry that is Just Getting Started

The global medical marijuana industry is in the first inning of a growth super-cycle and is already a multi-billion-dollar business. The opening of new markets and the development of new products continue to serve as catalysts that will advance and expand the legal medical marijuana industry and we think this industry is only getting started.

The companies mentioned above and the following firms are ones that we think investors need to watch: Aurora Cannabis (ACB.V) (ACBFF), Organigram (OGI.V) (OGRMF), Cronos (MJN.V), MedReleaf (LEAF.TO), Cannabis Wheaton (CBW.V) (KWFLF), Canabo Medical (CMM.V) (CAMDF), Reliq Health Technologies (RHT.V) (RQHTF), Golden Leaf Holdings (GLH.CN) (GLDFF), ICC International Cannabis Corp (ICC.V) (ICCLF), Invictus MD Strategies (IMH.V) (IVITF), Lexaria Bioscience (LXX.CN), (LXRP), and Friday Night (TGIF.CN).


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This report was authored by and is property of Mushroomstocks.  All information and data relied upon in drafting this report is publicly available.  The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report.  Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice.  Any projections or other information generated by Mushroomstocks regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment.  This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation.  The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals.  It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction.  Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks.  The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission.  Please contact a Financial Advisor for professional advice regarding any and all securities investments.  This report is intended for informational purposes only

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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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