Is Emblem Corp. The Most Undervalued Stock Amongst The Canadian Licensed Producers?

In 2018, Emblem Corp. (EMC.V) (EMMBF) has been nothing short of an execution story and this comes after the company replaced its CEO. We are favorable on the continued execution and consider Emblem to be one of the most undervalued Canadian cannabis companies.

In the last month, emblem has significantly advanced its story and we are favorable on the recent developments. From a recreational supply agreement in Alberta to a joint venture in Germany, Emblem has been laser focused on growth and this is a stock that investors need to keep an eye on.

Signs Recreational Supply Agreement and Expands to Germany

In early July, Emblem’s subsidiary, Emblem Cannabis Corporation, completed an agreement with the Alberta Gaming, Liquor & Cannabis Commission (AGLC) to supply high quality cannabis products for the province’s recreational marijuana market.

In late June, Emblem announced the formation of a joint venture with German pharmaceutical wholesaler Acnos Pharma GmbH for the purpose of exporting Emblem branded cannabis products from Canada and importing them into Germany. The joint venture will operate under the name Emblem Germany and will be 60% owned by Emblem, subject to the completion of definitive agreements.

Subject to the entering into of definitive agreements, Emblem will supply the joint venture with cannabis oil for sale to German pharmacies, wholesalers and clinical labs for medical purposes. The companies expect to commence export sales to Germany in 2019.

This is a significant relationship and places Emblem branded products in one the most exciting markets. In early 2017, Germany legalized medical marijuana and represents a massive opportunity, with a population north of 80 million. Germany will also provide Emblem with a stepping stone to other European markets and we are favorable on this relationship.

Once Emblem’s new 30,000 square foot Good Manufacturing Practices (GMP)-certified extraction facility is complete, the Canadian cannabis products will be able to significantly increase its extract and derivative product output to meet the expected demands of the German market.

An Attractive Focus on the Smokeless Product Market

Emblem is an undervalued Canadian cannabis producer that is in the middle of a major expansion. We are bullish on this initiative as it will significantly benefit company fundamentals and are monitoring how the team continues to execute.

We are favorable on the focus on the cannabis extract market and view this as a major value driver for the company. Demand for cannabis extracts continues to increase and we expect the trend toward smokeless products to become even more significant over the next few years. Since inception, Emblem has been laser focused on this opportunity and we excited by the growth potential.

In mid-May, Emblem and Canntab Therapeutics Limited (PILL.CN) received Health Canada approval for research and development activities on oral sustained release formulations of cannabinoids, representing significant progress in the companies partnership to develop long-acting cannabis formulations.

Canntab brought equipment to Emblem’s Paris, Ontario facility and started making the first batch of the products using its patented technology and proprietary processes. This initial batch will undergo rigorous testing both internally by Emblem and Canntab and externally by third-party laboratories. Upon achievement of the product‘s target design criteria, the companies intend to submit a full dossier to Health Canada for review and approval.

An Undervalued Opportunity

We think the new management team at Emblem has been executing flawlessly and we find the valuation to be very attractive. As the company continues to execute, fundamentals will continue to improve, and we expect the market to respond favorably to this.

We are favorable on the improved distribution via an agreement with Shoppers Drug Mart as well as the relationship with companies like Fire and Flower, a retail cannabis-lifestyle brand and store concept.

When compared to its peers, Emblem is very attractively valued, and we think the market underestimates its potential. We are excited by the recent developments and investors need to keep an eye on this one.