THC BioMed Intl Ltd. (OTCQB: THCBF) is an ACMPR Licensed Producer and a supplier of legal Cannabis Genetics. THC also produces and sells dried and fresh marijuana and cannabis oil for medical purposes. The company is also active in scientific research and the development of products and services related to the medical cannabis industry.
In order, to leverage on the lucrative cannabis business, the company is aggressively pursuing its diversification and overall expansion strategies. THC has entered into a Letter of Intent with an Australian licensed importer and wholesaler of medical cannabis for the acquisition of 51% of that company and has incorporated a new subsidiary in Lesotho, Africa, to apply to become a licensed producer in that country.
Analyst tracking the stock believes that this move would help THC to become a licensed producer in Lesotho. Moreover, company’ presence in Lesotho would be an extremely positive factor in the growth of the economy and employment in Lesotho. Also, this would substantially enhance the operational profile of the company, as the relatively low cost of production will lead to a high-quality product at prices with which products are grown in North America and elsewhere can’t compete. Lesotho’s growing conditions make it an ideal place for cannabis cultivation with a low risk of crop failure.
Other key Announcements:
- Before this, in Dec’17 the company announced that Health Canada had amended THC’s ACMPR license to include four additional Grow Rooms. These additional Grow Rooms will allow THC to ramp up production, substantially adding 400kg per annum.
- The company also announced that it has entered negotiations to purchase a greenhouse business in Ontario, Canada’s most populated province. The greenhouse business has been operating for more than 20 years and is well suited for growing cannabis. Successful completion of the acquisition would immediately give THC 100,000 square feet grow capacity with both facilities combined and an expansion capability of 300,000 square feet.
- THC recently had its facility inspected for Good Manufacturing Practices to enable the export of products to the European Union. We expect positive results from the inspection and hope to receive certification soon.
As legalization of cannabis sets in globally, THC has seen a rapid demand for its cannabis products by the international market. The company’ has made incredible progress in 2017 and management expects that the company’ outlook over the near to medium term would demonstrate the benefits from an early mover perspective.
Analysts tracking the stock believes that THC 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 THC a favorite 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 $0.86, can move to a level of $1.46 in next few months.
About the Company: THC is engaged in scientific research, development of products and services related to the medical cannabis industry while creating a standard of excellence. As the industry develops, it will become more important to focus on scientific research and development of products and services related to medical cannabis. Management believes THC is well-positioned to be in the forefront of this rapidly growing industry
Financials for the quarter ended January 2018:
- The total revenue earned for the six months ended January 31, 2018, includes sales revenue of $438,828 and consulting fees of $142,857.
- The Company’s expected source of cash flow in the upcoming year will be through debt or equity financing. Cash on hand on January 31, 2018 and expected cash flows for the next 12 months might be insufficient to fund the Company’s ongoing operational needs.
- The Company would need funding through equity or debt financing, entering into joint venture agreements, or a combination thereof. The Company has already entered into a Capital Commitment Agreement with GEM Global Yield Fund LLC SCS (“GEM”) for a $10,000,000 capital commitment along with a capital commitment from Alumina Partners (Ontario) Ltd. for up to $12,000,000. At January 31, 2018, the remaining amounts that can be drawn down under these commitments are $9,160,026 and $7,300,000 respectively.
Key risk factors and potential stock drivers:
The key near to medium term driver would be to the legalization of recreational marijuana in
Notwithstanding THC’ diverse business profile, 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;
Company’s ability to continue the growth momentum would be an essential factor. Moreover, given the sector it operates in, it is necessary for the company to keep innovating or acquire other entities in a bid to grow and consolidate its overall resources;
The company continues to face significant regulatory risks and uncertainty, while at the same time additional states legalize cannabis.
- On Friday, June 15th, 2018, THCBF closed at $0.87, on volume of 34K shares exchanging hands. The current RSI is 44.22
- At $0.87, shares of THCBF are trading below its 50-day moving average (MA) at $0.96 and below its 200-day moving average (MA) at $0.94
- The present support and resistance levels for the stock are at $0.7933 & $0.9233 respectively.
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