JohnCM
5年前
3 Premium Cannabis Brands Capitalizing On The Nevada Market
June 26, 2019
BY ANTHONY VARRELL
2019 has been a banner year for the US cannabis industry and has been highlighted by massive acquisitions and cross-country expansions. The recent developments have been significant, and we have been favorable on the way the US cannabis industry has advanced. The recent advancements have been beneficial for the companies that are levered to the US market and this is a trend that we expect to continue.
Over the next year, we expect to see further consolidation as the US cannabis market continues to become a more significant opportunity. Earlier this month, we visited Las Vegas and continue to be impressed by this cannabis market. One of the primary reasons for us being so favorable on the Las Vegas opportunity is due to the more than 42 million tourists that visit the city on an annual basis.
When a company is working to build a national (or global) brand, they need to be focused on several key markets. These markets are similar in the way that they attract tourists and bring the people to the brand. We are favorable on this strategy and believe it is a cost-effective strategy for a company that is trying to reach the largest possible markets.
One of the reasons why we are favorable on this strategy is because these tourists return home and remember the brands they came across. This creates a great opportunity for these brands once they enter the markets where these tourists live and believe that the Las Vegas market is the best market for accomplishing this goal for the cannabis industry.
We have been bullish on the Las Vegas cannabis market and this is an opportunity that we continue to closely monitor. Today, we want to highlight 3 cannabis companies that are levered to the Las Vegas cannabis opportunity and have been working to expand its position in the US market.
Vapen MJ Ventures: Expanding its Position on the West Coast
Vapen MJ Ventures (VAPN.CN) is a cannabis company that we have been excited about and continue to monitor. Last week, the company announced a letter of intent with Pegasus to establish a partnership for the production and extraction of cannabis in Las Vegas, Nevada. Demand for cannabis concentrates continues to increase and this is a trend that we have been especially excited about.
Through this partnership, Vapen will be able to create significant brand awareness and are favorable on the growth prospects associated with this relationship (which is expected to be get started in the next 30 days). This operation is expected to commence in the fall and the product line is expected to include cannabis extracts (vape pens and concentrates) and cannabis infused products (i.e. candies, gummies, chocolate bars).
One of the reasons we are favorable on this partnership is related to what each company brings to the relationship. Vapen will provide management services and standard operating procedures for production and extraction. The company will also be responsible for the bulk extraction for other brands. Pegasus and their partners are supplying funding for the equipment, working capital, and biomass. We expect this relationship to start generating significant revenues late in 2019 and will monitor how the team is able to execute on this.
Vapen is a proven operator and has created a leading medical cannabis concentrate brand in Arizona with distribution to more than 100+ dispensaries in the state. Arizona is the third largest medical cannabis market in the US and we are favorable on the company’s ability to capitalize on this burgeoning opportunity. If recreational cannabis is legalized in Arizona, it should prove to be a major catalyst for companies like Vapen and this is something that we are excited about.
We believe that Vapen has several major potential catalysts for growth and find this to be significant. The company is led by a management team with a proven track record of success and that is laser focused on expanding its reach. Vapen offers a premium product line and has leverage to some of the most attractive verticals of the cannabis industry. We are favorable on the move into Nevada and expect to see the company enter new markets in the near future. Vapen represents an exciting opportunity and one that we will continue to be watching.
1933 Industries: An Emerging CBD and THC Opportunity
Earlier this month, we visited 1933 Industries (TGIF: CSE) (TGIFF: OTCQB) while visiting Las Vegas and this is an opportunity that we are excited about. In the very near future, the company will be moving into a much larger facility and this is expected to have a massive impact on the amount of revenue that can be generated.
One of the reasons we are very excited about this opportunity is related to the brands that are owned by 1933 Industries. The company is comprised of three distinct brands: Alternative Medicine Association (AMA), Canna Hemp, and Denver Dab Company (DDC). These brands are levered to both the cannabidiol (CBD) and tetrahydrocannabinol (THC) opportunity and have been generating significant traction.
While AMA and DDC have attractive leverage to the THC opportunity, Canna Hemp is highly levered to the cannabidiol (CBD) opportunity and we believe that this is one of the most attractive aspects of the business. During the last year, Canna Hemp has gained significant traction and the products are now being carried by more than 600 retail stores across the US.
Demand for the company’s THC and CBD products continues to increase and this is an important part of the story. Once the new facility becomes operational, 1933 Industries should see its production capacity increase ten-fold and will result in the production of much more company-branded products. We expect this facility to come on-line in the near future and this should be a major catalyst for the business.
Although 1933 Industries has massive potential catalysts for growth, the shares have been under pressure and have been trading lower with the overall cannabis sector over the last few months. We believe this pullback is overdone and believe that the valuation is very attractive after this move lower. Based on the potential revenue that can be created through the new facility, the risk-reward scenario is attractive, and we are excited about this opportunity.
Ionic Brands: An Emerging US Cannabis Branding Play
Last month, we highlighted Ionic Brands (IONC: CNX) (ZRRRF: OTC) which has been able to penetrate some of the most competitive cannabis markets by accumulating a portfolio of leading cannabis brands. When it comes to the branding opportunity for cannabis products, we believe that Ionic Brands has had its finger on the pulse of the cannabis market and this is an opportunity to be watching.
When it comes to the Las Vegas opportunity, Ionic Brands has significant leverage to this burgeoning market and recently completed the previously announced acquisition of Vegas Valley Growers North (VVG), a vertically-integrated cannabis business that has been generating significant cash flow and is expected to generate approx. $6.6 million of revenue in 2019. One of the reasons we are favorable on the acquisition of VVG is due to the amount of synergies that can be found between the businesses. Another reason we are excited about this transaction is related to the amount of exposure that will be created for Ionic’s portfolio of premium cannabis brands with domestic and international cannabis consumers.
VVG’s flagship product is the Vegas M Stick and the Reno M Stick branded vape pens which have distribution into more than 75% of the dispensaries in Nevada and we find this to be significant. The acquisition of VVG also includes four state licenses for the cultivation and manufacturing of both medical and recreational cannabis. The company expects to be granted the medical and recreational cannabis distribution licenses in the near future and this should be a catalyst for the entire business.
When looking at VVG, of the most exciting aspects of the story is related to the expansion opportunity. Currently, VVG operates a 1,700 sq. ft. production facility and is the process of building a 60,000 sq. ft. manufacturing facility that is expected to completed in the third quarter of 2019. VVG is also planning to construct an 80,000 sq. ft. facility in the fourth quarter of 2019 and we find this to be significant. One the expansion is complete, VVG will be one of the largest cannabis producers in Nevada and we will monitor how the team executes on this.
Later this year, we expect to see several Ionic branded products added to VVG’s existing distribution pipeline and are bullish on the growth prospects associated with this. The company expects to increase sales of Ionic branded products by leveraging off VVG’s existing distribution pipeline and by introducing a variety of Ionic branded products to this distribution channel. Over the next year, we expect the Nevada market to prove to be a major growth driver for Ionic Brands and believe that the market underappreciates the growth prospects associated with this.