This Canadian producer of high-quality pharmaceutical-grade cannabis is using international joint ventures to expand its operations. Still, its debt is low and it holds a strong cash position.
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CANNTRUST HOLDINGS, $9.44, symbol TRST (Shares outstanding: 105.4 million; Market cap: $955.8 million; TSI Cannabis Quality Rating (CQR): ; www.canntrust.ca), is a Canadian-based producer of medical cannabis with distribution in Canada, Denmark and Australia. In addition, the company plans to branch into the recreational and pet-medicines markets.
CannTrust started production of medical cannabis under license from Health Canada in 2014. The company currently operates two facilities.
The largest is a 450,000-square-foot commercial greenhouse located in Niagara, Ontario. The Niagara plant is located on 46 acres of land, which can also be used for further greenhouse facilities or outdoor production.
The second plant is located in Vaughan, Ontario, and is a 60,000-square-foot hydroponic indoor facility.
CannTrust’s primary focus is to produce and deliver high-quality, pharmaceutical-grade cannabis products, to grow its market share in Canada and to establish markets for its products in international jurisdictions where its use is legal.
In Canada, the medical use of cannabis has been legal since 2001; there are currently about 270,000 registered patients. Estimates are that medical users could grow to 450,000 over the next few years, consuming 163,000 kilograms of cannabis. Medical marijuana is the core business of CannTrust right now, where the company has over 60,000 active patients.
CannTrust also has a joint venture with Apotex, the seventh-largest generic pharmaceutical manufacturer in the world, to develop dosage formats and new products. When permitted, the partners intend to sell these products into the more than 85 countries where Apotex currently has a presence.
In addition to that deal, CannTrust has 25% equity interest in Stenocare, a Danish company, to produce and sell medical cannabis in Denmark. CannTrust has also formed an export partnership deal with a large German pharmaceutical distributor and, separately, it holds a license to produce and sell medical cannabis in Australia.
The company plans to enter the recreational Canadian market, which is much larger than the medical market. Canada’s legalization of marijuana for recreational was passed into law on October 17, 2018.
CannTrust also plans to deliver cannabis in beverage and edible form when legislation allows, probably in 2019.
Apart from the medical and recreational markets, CannTrust is also in partnership with Grey Wolf Animal Health Inc., to develop and market cannabis products for the pet market.
In the three months ended September 30, 2018, CannTrust’s revenue rose 105.0%, to $12.6 million from $6.1 million, a year earlier. The company made $421,240, or nil per share, compared to a profit of $655,309, or $0.01. However, the profit in both quarters was due to estimated gains on the value of CannTrust’s inventory of cannabis. On an operating basis, it lost money.
The company has low debt. It held cash of $86.3 million on September 30, 2018.
CannTrust’s established position in the medical marijuana field is a plus. Its plans to also grow marijuana outdoors should help it remain competitive as producers across the industry continue to expand their growing capacity.
Shares of many marijuana stocks may move higher as momentum traders buy the widely followed stocks on the latest upswing. However considering their current sales, many Canadian producers have very high “market caps” (the value of all shares outstanding). That means they need huge revenue growth even to justify their current stock prices. If revenues merely hold steady or rise only slowly, their stock prices will be vulnerable.
This includes CannTrust—although the gap between its market cap and its sales isn’t as big as it is for many of its competitors.
CannTrust Holdings has a 3½-Leaf Cannabis Quality Rating (CQR). The stock is a speculative buy for aggressive investors who want exposure to the marijuana industry.
Comments
Todd
Already hold CannTrust. Bought in Oct 2018 when Pat first recommended it.
Thanks for your question. We don’t cover Delta 9 in any of our newsletters — but we may look at it in the future in response to a question from a member of our Inner Circle.
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; www.canntrust.ca), is a Canadian-based producer of medical cannabis with distribution in Canada, Denmark and Australia. In addition, the company plans to branch into the recreational and pet-medicines markets.
Already hold CannTrust. Bought in Oct 2018 when Pat first recommended it.
could you do an analysis on delta 9. thanks
Thanks for your question. We don’t cover Delta 9 in any of our newsletters — but we may look at it in the future in response to a question from a member of our Inner Circle.