This Canadian cannabis grower aims to take its premium strains of marijuana worldwide. It’s also investing $14 million in a facility to research cannabis plant genetics and develop disease-resistant varieties.
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SUPREME CANNABIS, $1.41, symbol FIRE on the Toronto exchange (Shares outstanding: 290.0 million; Market cap: $417.2 million; TSI Cannabis Quality Rating (CQR): ; www.supreme.ca), is a Canadian cannabis grower, plus it has other interests worldwide.
The company’s 7ACRES subsidiary owns a 440,000-square-foot facility located in Kincardine, Ontario. Through 7ACRES, Supreme Cannabis grows what it believes is a premium grade of cannabis flower.
The facility currently has in operation 230,000 square feet of flowering room capacity, with output of approximately 33,580 kilograms of dried cannabis per annum. Once expanded to its full 440,000 square feet, including flowering rooms, processing and administrative areas, the facility should produce 50,000 kilograms of premium dried cannabis per year.
Right now, 7ACRES’ premium flower is available for legal adult recreational use customers in B.C., Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia and Prince Edward Island.
Supreme Cannabis also recently launched Cambium Plant Sciences, an intellectual property company focused on plant genetics and cultivation. Cambium aims to develop disease-resistant, premium seed stock for the rapidly growing global cannabis market. To do that, it will invest $14 million to build a state-of-the-art, 34,000-square-foot research and development facility located in Goderich, Ontario.
Supreme Cannabis also owns Medigrow Lesotho (PTY) Limited, a cannabis oil producer located in southern Africa; in addition, it has a brand partnership and licensing deal with Khalifa Kush Enterprises Canada ULC.
On March 11, 2019, the company announced a preliminary agreement with Malta Enterprises, as a first step in obtaining a cannabis production licence in that country. Supreme Cannabis hopes that the Malta licence, if approved, will help the company expand in the growing European wellness and medical cannabis market.
Supreme Cannabis believes the premium product segment represents the best opportunity to protect its business against any fall in prices should the market becomes oversupplied. It also hopes that the knowledge and experience it has gained through 7ACRES’s focus on premium cannabis can be applied to other product segments, including cannabis oil and other concentrates. That product should become legal for recreational use and sale in Canada, along with edibles, on October 17, 2019.
In the three months ended March 31, 2019, the company’s revenue jumped 381.9%, to $10.0 million from $2.1 million a year earlier. It lost $7.1 million, or $0.02 a share, compared to a loss of $3.4 million, or $0.01, a year earlier.
Supreme Cannabis has long-term debt of $75.5 million on March 31, 2019. It also held cash of $75.0 million.
Shares of many marijuana stocks may rebound and 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 to even justify their current stock prices. If revenues merely hold steady or rise only slowly, their stock prices will be vulnerable.
This includes Supreme Cannabis—although the gap between its market cap and its sales isn’t as big as it is for many of its competitors. The company’s more-established position in the marijuana field is also a plus. That could also make the company a potential takeover candidate. While that alone is not reason enough to buy the stock, it adds to Supreme Cannabis’s appeal.
Supreme Cannabis has a 3-Leaf Cannabis Quality Rating (CQR). The stock is a speculative buy for aggressive investors who want exposure to the marijuana industry.
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