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ABcann: A Compelling Value After Going Public

Ryan Allway

May 16th, 2017

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Canada’s cannabis industry could be worth upwards of $22.6 billion over the coming years, while many analysts are predicting a shortfall in supply. As a result, licensed producers have become an attractive investment opportunity, with many approaching C$1 billion valuations over the past several quarters. Investors may want to take a look beyond the headline licensed producers toward newer entrants to the market that have only recently gone public.

In this article, we will take a look at ABcann Global Corp. (TSXV: ABCN) (OTC: ABCCF) following its going-public transaction and why investors may want to consider investing.

Attractive Comparable Valuation

There are about 40 licensed producers that have received approval from Health Canada to cultivate and sell medical cannabis to consumers. The largest company in the space is Canopy Growth Corp. (TSX: WEED), which has become the first cannabis ‘unicorn’ with a valuation that’s well over C$1 billion. Many other licensed producers are close to achieving these kinds of valuations as they ramp up production and revenue.

Company Name Ticker Symbol Market Capitalization
Canopy Growth Corp. TSX: WEED C$1.37 Billion
Aurora Cannabis Inc. CA: ACB C$844.48 Million
Aphria Inc. CA: APH C$815.19 Million
Organigram Holdings Inc. CA: OGI C$258.55 Million
Supreme Pharmaceuticals Inc. CNX: SL C$243.74 Million

* Data as of May 10, 2017.

ABcann Global is attractively priced by comparison with a market capitalization of about C$85 million, despite being one of the first licensed producers approved by Health Canada in 2014. The company hasn’t scaled up its production as quickly as other LPs, but it has signed high-profile partnerships and developed some of the highest yields in the industry. ABcann has also shipped product to Syqe Medical in Israel – the innovator behind the first metered dosage inhaler – and continues to support its testing and R&D.

In addition, the company has the cash on hand to significantly expand its capacity over the near-term. Management anticipates that its Van Luven facility will double its capacity, to about 29.000 square feet, this year while the Kimmet facility will come online next year with a 150,000 square foot presence.

Experienced Management Team

ABcann Global has an experienced management team that’s well-positioned to execute on plans to become a leader in the space.

Chairman Ken Clement has developed a strong rapport with Health Canada and cultivated several strategic partnerships around the world. His goal of standardizing production and doses of cannabinoids has help shaped the company’s unique focus relative to other licensed producers that are focused on simply maximizing production of commoditized products that will eventually be hard to compete against as the market grows.

CEO Aaron Keay has over 10 years of experience across many different sectors, serving in corporate finance, senior management, and board member roles. With a history of raising over $250 million, Mr. Keay is well-positioned to help the company secure funding and grow. Mr. Keay is also joined by a seasoned executive management team with experience across areas of management, finance, and the operation of cannabis businesses.

Finally, the company has developed a solid board of advisors that includes the ‘father of cannabis’, Dr. Raphael Mechoulam, Ph.D. Dr. Mechoulam is an organic chemist and professor of Medicinal Chemistry at the Hebrew University of Jerusalem. He’s best known for being the first scientist to isolate tetrahydrocannabinol (THC) and then cannabidiol (CBD) in 1963. Dr. Mechoulam is joined by many other prominent researchers and scientists in the field.

Rapidly Growing Market

Canada’s cannabis industry could be worth between $12.7 billion and $22.6 billion by 2020, according to Deloitte Canada, eclipsing the combined sales of beer, wine, and spirits. The country is widely expected to implement recreational legalization by early next year, which could open the market significantly beyond the medical users that are currently served under the Access to Cannabis for Medical Purposes Regulations – or ACMPR.

PI Financial believes that there could be a shortfall in supply with only about 40 companies licensed by Health Canada to grow and sell the drug. According to a recent report, the analyst reckons that LPs would need to cultivate a total of 610,000 kilograms to fulfill domestic and export demand by 2019. The problem is that existing capacity would fall short and lead to a 200,000 kilogram shortfall and it could be difficult to onboard enough new LPs.

“The rigorous process of becoming a licensed producer of cannabis in Canada imposes significant barriers to entry and there will be a shortfall in supply in a legalized market in the short-term until production capacities catch up by 2020,” said Canaccord Genuity Group analysts in a November 2016 research note. This could create an enormous opportunity for existing licensed producers that enjoy an oligopoly of sorts.

Looking Ahead

ABcann Global Corp. (TSXV: ABCN) (OTC: ABCCF) represents a compelling investment opportunity in Canada’s burgeoning cannabis industry. With a focus on standardization and dosing, the company is developing a competitive edge in the medicinal side of the industry while building out its production capacity and its high-yield strategies. Investors may want to keep an eye on the stock following its going-public transaction on May 4.

For more information, visit the company’s corporate website at www.abcannglobal.com.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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