Demand Outpacing Supply as Canadian Cannabis Legalization Looms

Tuesday, October 3, 2017 General News
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NEW YORK, October 3, 2017 /PRNewswire/ --

The Canadian government's

plan to push through legalization of marijuana for recreational purposes by mid-2018 figures to deal a serious blow to the existing black market. However, industry analysts are increasingly skeptical of the ability of the country's Licensed Producers
to keep pace with this forecast spike in demand. As noted in a recent article published by CBC, "Unless something changes quickly, the supply of available pot come legalization next July, will be inadequate, and the black market will continue to thrive." ABcann Global Corp. (OTC: ABCCF) (TSX-V: ABCN) (ABCCF Profile), with its healthy cash position and aggressive expansion plans, is one company seeking to address these supply concerns, particularly in the medicinal market. Joined in the space by Canopy Growth Corp. (OTC: TWMJF) (TSX: WEED), Aurora Cannabis, Inc. (OTC: ACBFF) (TSX: ACB), Aphria, Inc. (OTC: APHQF) (TSX: APH) and Medical Marijuana, Inc. (OTC: MJNA), ABcann's relatively low market cap and beefy portfolio of pharmaceutical-grade IP have it on the radar of investors looking to capitalize on Canada's much-anticipated "green" revolution. Mere months out from its initial public offering, ABcann Global Corp. (OTCQB: ABCCF) (TSX.V: ABCN) has already shown tremendous potential in setting itself apart from other Canadian growers. The backbone of the company's operations, which focus on the development of consistent pharmaceutical-grade products that are organically grown and pesticide-free, is its proprietary growing technology. As noted on its website, ABcann's products are always free of chemicals and produced in small batches to ensure high quality standards. This commitment to quality has helped ABcann steer clear of the recent wave of product recalls in the Canadian cannabis market that has affected many of the industry's biggest names. Scaling these operations has become a major focus for ABcann's management team in recent months, as highlighted by the company's latest strategic moves. In mid-September, ABcann announced its reception of $11.9 million in total proceeds from the exercise of warrants. When combined with an earlier investment from cannabis streaming company Cannabis Wheaton Income Corp., the infusion brought ABcann's cash position to approximately $45 million. As Aaron Keay, director of ABcann, noted in that news release, "The Company's main focus in the coming months will be on the deployment of capital towards the expansion of [its] existing Vanluven facility and development and construction of the new Kimmett facility, as well as the pursuit of [its] international expansion plans." These facilities mark another upside of ABcann's business model, as the company owns the land it intends to use for these expansion projects, eliminating potentially costly leasing expenses. Supported by a strong management team and guided by an experienced advisory board featuring the "Father of Cannabis Research" Dr. Raphael Mechoulam, ABcann's favorable production yields place it at the forefront of an extremely competitive market. In its corporate presentation, ABcann compares its yields with industry averages based on PI Financial estimates. Cannabis industry mainstay Canopy Growth Corp.'s (OTC: TWMJF) (TSX: WEED.TO) indoor yield per square foot is estimated at roughly 100 grams. Comparatively, ABcann's indoor yield clocks in at nearly 350 grams per square foot, and the company is targeting further refinements that could support yields in excess of 425 grams per square foot in the near future, far outpacing industry averages. PI Financial, in a May 2017 report, provided some insight into the potential upside offered by ABcann's proprietary growing techniques as the Canadian cannabis market enters its latest boom period. The analyst firm notes that ABcann is currently on course to reach breakeven as soon as the second quarter of 2018, with a ramp up in sales to $74.2 million forecast for fiscal 2019. These projections came alongside a 'Buy' rating and a 12-month price target of C$2.25 for ABcann's Canada-listed shares, which were trading at C$0.96 as of close of market on September 29. Promising research reports aside, ABcann's recent efforts to address the expected shortfall in Canadian cannabis supply place it at the forefront of the blossoming industry. Its strong cash position is being used to both expand its fully-operational Vanluven facility and continue construction of its 150,000-square-foot Kimmett facility. As noted in a July news release, ABcann expects first cultivation from the Kimmett facility in the fourth quarter of 2018, with the project reaching full production capacity by the first quarter of 2019. With this expansion, the company will look to expand on its position in the Canadian market while pursuing a number of global initiatives in Europe, Israel and Australia. "We expect that the increase in production capacity will enable ABcann to increase the sales of our premium, organically grown, pesticide free cannabis products in the current domestic market and position the Company for global distribution in the emerging markets we have targeted," Keay noted in an August update. "Further, the ability to serve larger and broader markets as a result of the production increase positions ABcann extremely well for the anticipated adult consumer market in July 2018." ABcann is joined in the Canadian cannabis sector by a number of companies exploring expansion options of their own. Canopy Growth Corp., widely-recognized as Canada's first $1 billion weed company, operates a number of core cannabis brands targeting both medicinal and recreational markets. Perhaps most notable in this brand portfolio is Tweed, which Canopy calls "the most recognized marijuana production brand in the world" on its website. The production capacity of the Tweed brand highlights the massive market potential of ABcann's current construction efforts. Per the Canopy Growth Corp. website, Tweed currently maintains roughly 168,000 square feet of licensed production space, and its campus located at the former Hershey Chocolate factory has about 500,000 square feet of available space for expansion. In other words, ABcann's 150,000-square-foot Kimmett facility, upon completion, will see the company's production space surpass one of the world's most notable cannabis brands, and its superior yields should push ABcann's production figures well beyond the current limits of Canopy's flagship label. Aurora Cannabis (OTCQX: ACBFF) (TSX: ACB.TO), on the other hand, had already set its sights on the forecast supply dearth expected to hit the Canadian market in the coming months. In November 2016, Aurora announced the start of construction on an unprecedented 800,000-square-foot production facility that it's calling 'Aurora Sky'. Completion of this project would mark a huge capacity increase from Aurora's current facility, which clocks in at just 55,200 square feet. In May, Aphria (OTCQB: APHQF) (TSX: APH.TO) threw its hat into the ring when it announced plans to triple its production capacity as part of its four-part construction effort in Leamington, Ontario. The expansion project is on course for completion in July 2018, according to Aphria CEO Vic Neufeld. Meanwhile, Medical Marijuana (OTC: MJNA), the first publicly traded cannabis company in the United States, has continued to fortify its presence on the international cannabis scene, becoming the first company to have cannabis products subsidized by the Mexican government earlier this year. Legalization of cannabis for recreational use is creating a huge opportunity for Licensed Producers in Canada. While quality concerns and product recalls have impacted the expansion efforts of many of the industry's most recognizable names, the importance of consistent and dependable growing techniques has been reaffirmed. ABcann's combination of a promising IP portfolio, a strong cash position, sizable real estate assets and a relatively low market cap - combined with a clean sheet in terms of product recalls and quality blunders - make it an intriguing investment option in the Canadian cannabis industry. Look for big moves as the company approaches ramp up of production at its new facilities in the coming months. For more information on ABcann Global Corp. please visit: ABcann Global (TSX.V: ABCN) (OTCQB: ABCCF) About NetworkNewsWire NetworkNewsWire (NNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) NetworkNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, NNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. NNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. 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