Emblem Corp. (OTCPK: EMMBF) is a licensed producer of medical cannabis under the Canadian Access to Cannabis for Medical Purposes Regulations. Led by a team of cannabis experts and former healthcare and pharma executives, the Company has three distinct verticals – cannabis production, patient education centers, and pharmaceutical development. Emblem trades under the ticker symbol EMC on the TSX Venture Exchange and EMMBF on the OTC markets.

 

Company’ business model and strategy:

On May 29th, the company reported financial and operating results for the first quarter ended March 31, 2018. Along with record sales and registered patient counts, EMMBF’s first quarter progressed rapidly in all areas (including market, operations and financial flexibility) as the company focused on executing its multi-year plan.

 

Key Highlights of 2018

• Generated $1.3 million in revenue & Cannabis oil sales represented 29% of Q1 patient revenue
• 2,950 registered patients as of March 31, 2018
• Signed a key supplier agreement to become a medical cannabis supplier to Shoppers Drug Mart Inc.
• $53.8 million financing increased cash balance to $83.8 million as at March 31, 2018
• Purchased remaining 50% of GrowWise Health Limited
• Progressed on expansion plans to increase annual capacity to approximately 17,000kg
• Construction progressing on 30,000 square foot Phase 3 expansion at the Woodslee Production Facility with GMP extraction facility, laboratory and pharmaceutical production facility
• Invested in Fire & Flower Inc. and entered into the 3-year preferred supplier agreement
• Increased patient count 22% to approximately 3,600 patients at May 28, 2018, since March 31, 2018
• Commenced R&D on oral sustained release formulations in collaboration with Canntab Therapeutics Limited (“Canntab”)
• Commenced inventory build for the legalization of adult-use recreational cannabis in Canada

 

Key growth driver over the near to medium term:

In an attempt to further grow its market share in the lucrative cannabis business, Emblem Corp continues to utilize its strong balance sheet to execute on its expansion plans for annual dried flower volumes initially to 17,000kg and to complete its 30,000-square foot expansion which includes a GMP certified manufacturing facility with an advanced research lab. The GMP certification will support international product exports. Further, Emblem is making strategic investments in pharmaceutical research and development, clinical research, marketing and promotion, product development and licensing, allowing the Company to maintain its leadership position within the medical-use market while preparing Emblem for a unique and competitive advantage in the recreational adult-use market.

 

From a relative standpoint, analysts expect that the company would continue to leverage on its extremely strong liquidity and relatively diverse business verticals. Furthermore, Emblem Corp’ strategic partnerships are likely to help the company in further diversifying and strengthening its revenue streams.

 

Analysts tracking the stock believes that EMMBF is presently at a critical inflection point and 2018 could be a year of multiple achievements for the company, as it aggressively pursues its commercialization, diversification and overall expansion strategies.  From a sectoral viewpoint, the accelerated interest of the market in Cannabis space has also made EMMBF a favourite play in the sector. Also, the muted performance of the stock in the recent past has created an incredible buying opportunity with significant upside potential. Taking a valuation call on the stock and the sector, share now ruling at $1.48, can move to a level of $2.70 in next few months.  

 

About the Company: Emblem Corp. is a fully integrated licensed producer and distributor of medical cannabis and cannabis derivatives in Canada under the ACMPR. Led by a team of cannabis experts and former healthcare and pharma executives, the Company has three distinct verticals – cannabis production, patient education centers, and pharmaceutical development. Emblem trades under the ticker symbol EMC on the TSX Venture Exchange and EMMBF on the OTC markets.

 

Key Operating Units and brands:

Financials for the First Quarter of 2018:

• Revenues increased to $1,277,000 in Q1 2018 from $903,000 in Q1 2017, an increase of 41%.
• Gross profit for the three months ended March 31, 2018, was $182,000 compared to a gross loss of $89,000 for the prior year comparable period, an increase of $271,000 or 304% due to higher revenues and a higher unrealized gain on changes in fair value of biological assets. With a total of five grow rooms completed and the receipt of the license for sale of cannabis oil during late 2017, the Company expects to generate a steady increase in gross profit throughout the remainder of 2018.

 

Key risk factors and potential stock drivers:

Continuing expansion of the legalized cannabis sector could be a catalyst for the company’s shares;

Notwithstanding EMMBF unique and differentiating factors, the company is still exposed to risk related to competition and peer pressure. There are other highly diversified cannabis companies in the industry. Additionally, there’s a cannabis ETF that recently launched for even more diversification;

Company’ ability to grow revenue while significantly improving its profitability will continue to remain a critical price sensitivity for the company;

The company continues to face significant regulatory risks and uncertainty, while at the same time additional states legalize cannabis.

 

Stock Chart:

 

Comments:

• On Wednesday, June 13th, 2018, EMMBF is trading at $1.13, on volume of 109K shares exchanging hands. Market capitalization is $136 million. The current RSI is 45.46
• In the past 52 weeks, shares of EMMBF have traded as low as $.93 and as high as $22.20
• At $1.13, shares of EMMBC are trading around its 50-day moving average (MA) at $1.15 and below its 200-day moving average (MA) at $1.33

 

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