Cann Group Limited (ASX: CAN) is in the business of legal cannabis production and sales for medical purpose and is making an effort to tap the medical cannabis market. The first medicinal cannabis cultivation licence and medicinal cannabis research licence, in Australia, were issued to the company. For the production and sale of medical cannabis, the company has established its own research and cultivation facilities in Melbourne.
On 21st March 2019, the company released its investor’s presentation wherein the company discussed its past performance, current operational updates and an outlook of the company.
The company stated about its industry leadership stats as follows:
- The company has two cultivation & R&D facilities currently operational in Victoria.
- Aurora Cannabis Inc. holds strategic 22.9% stake.
- For major stage 3 expansion, the sites have been secured near Mildura, Victoria.
Some of the major expansion plans for the world-class facility at Mildura site are as following:
- The Mildura site is to be purchased for $10.75 million.
- It would have an expected production capacity of 50,000 kg of dry flower per annum which will generate revenues of approximately $160-$200 million at the current wholesale price of cannabis dry flower.
- It would give the company, the potential to partner with growing renewable energy producers in NW Victoria.
- $130m construction cost is to be funded using a mix of debt & existing balance sheet equity.
The company recently entered an offtake Agreement with Aurora Cannabis Inc. Under the agreement the company, Aurora Cannabis Inc. covers Cann’s total current and planned future capacity to supply GMP processed dry flower, extracted resin and manufactured medicinal cannabis products. The GMP grade medicinal cannabis products will also be exported to meet global demand.
The Global Market scenario
According to an estimate, the global legal medical cannabis market is estimated to be US$20 billion and may touch a massive US$232 million by 2027. More than 50 countries have legalised medicinal cannabis with another circa ten expected this year. Registered patient numbers are growing in various geographies, and Recreational use in markets such as Canada placing pressure on the supply of medicinal cannabis. Germany has legalised and is reimbursing almost 50,000 patients had been registered.
Growth opportunity in Cann Group
The company is constantly building the capability and strength of the management team. It is working collaboratively on a focused growth strategy targeted at improving the quality of life for patients, with medical conditions also secured offtake agreement for growing export markets.
The company has also stated its outlook for the next several months. It would start the supply of resin to the Victorian Department of Health and is simultaneously focusing on the Australian patient supply. The testing of export pathways with Aurora would commence with expected progress of Mildura facility.
On the technical front, the stock rose by more than 9.95% on ASX and closed the day with A$2.21 as of 21st March 2019, compared to the previous closing of A$2.01. The stock has given a decent rally of 13.8% in the last one month, while YTD return stands almost flat at A$0.5%.
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