The first half of 2020 is over and companies are working tirelessly so as to make up for lost time on account of the COVID-19 outbreak.
One of the ways that companies are able to significantly increase production capacity for a minimal increase in costs is through outdoor cultivation. By growing cannabis outdoors, companies are able to significantly lower the cost per gram of cannabis and this is a vertical that we are excited about.
Notwithstanding the cost benefits associated with cultivating cannabis outdoors, it is a challenging undertaking, and many leading Canadian cannabis producers were not able to succeed with it in 2019. Going forward, we expect to see an increase in the amount of cannabis that is being cultivated outdoors in Canada and are favorable on the companies that have a proven track record in this sector.
When it comes to the outdoor cannabis cultivation opportunity, Aleafia Health Inc. (AH.TO) (ALEAF) is a proven success story and is an operator that we are bullish on. During the last year, the company has executed a series of high-impact growth initiatives and we expect the business will record incremental growth on a going forward basis.
In 2019, Aleafia Health was one of the only companies to be successful with the outdoor cannabis market and this is a trend that we expect to continue. One of the main differences from Aleafia Health’s operation in 2019 is the size of the existing facility. Earlier this year, Health Canada granted a license amendment for the company’s outdoor operation that incrementally increased the amount of land that it can cultivate on.
Based off the 2019 numbers, Aleafia Health is poised to see a more than 10x increase in the amount of cannabis than can be cultivated on the property and we are bullish on the growth prospects that are associated with the operation. After Health Canada granted Aleafia Health an additional license amendment on a facility that is focused on developing cannabis 2.0 products, the company is well positioned to benefit from the sale of high-margin cannabis derivative products (i.e. edibles, drinkables, concentrates, and vape pens).
One of the reasons why Aleafia Health is well positioned to record substantial growth is due to the amount of 2.0 products that can be created with the cannabis from an outdoor operation. There is a huge difference in the quality and type of cannabis that is grown in an indoor facility an outdoor facility. By using the cannabis from the outdoor operation to create derivative products, the consumer will not identify the source of the cannabis that the products are derived from but will certainly recognize the quality.
Since Aleafia Health is processing the cannabis from the outdoor operation, it is able to extract the high value cannabinoids and use them to create cannabis 2.0 products. We are favorable on the strategy that is in place and expect it to significantly improve profit margins for the entire business.
At current levels, Aleafia Health has a compelling valuation and a favorable risk-reward profile. The company recently settled a lawsuit with a leading Canadian cannabis producer that resulted in the granting of $15 million of cash and stock. We believe that the market does not fully appreciate the potential catalysts that Aleafia Health has for growth and this is an opportunity that we are excited about.
Canopy Growth Corporation (WEED.TO) (CGC) was unsuccessful with the outdoor cannabis cultivation opportunity in 2019. Canopy Growth’s failure to have sucessfully grown cannabis outdoors is a testament to the strength of the Aleafia Health team and we find this to be of importance.
Pursuant to an agreement between StoneBridge Partners LLC and Aleafia Health Inc. (ALEF) we have been hired for a period of 90 days beginning February 15, 2020 and ending August 15, 2020 to publicly disseminate information about (ALEF) including on the Website and other media including Facebook and Twitter. We are being paid $8,000 per month (ALEF) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero shares of (ALEF), which we purchased in the open market. We plan to sell the “ZERO” shares of (ALEF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (ALEF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.
Published at Tue, 07 Jul 2020 11:36:24 +0000