Miami, FL–(EmergingGrowth.com Newswire – May 3, 2019) – EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on MYM Nutraceutical (OTCQB: MYMMF).
- Hemp market poised for exponential growth
- Hemp growers will rise as the dominant consolidation force
- Beverage market is a key driver of growth
- Best of breed stocks poised to benefit the most
Passage of the Farm Bill, which downgraded Hemp to a schedule 3 substance has opened up a huge market opportunity. Early adopters like MYM Nutraceutical (OTCQB: MYMMF) with its global footprint are surely to benefit from the growth and eventual consolidation. There is a compelling case to buy the stock. The Farm Bill legalized the production of Hemp and Cannabidiol (CBD) which has over 25,000 recorded uses. Many companies are trying to gain a foothold in this market for good reason. The cost of CBD isolate is going for $4,000to $10,000per kilogram. This market opportunity looks like its is going to chart a similar course that resulted in the legalization of cannabis in certain states, but it’s much more sustainable because of the number of other uses of Hemp. Industrial hemp-CBD contains less than .3% THC which is the psychoactive ingredient in marijuana. For this reason marijuana doesn’t have the same mainstream appeal as CBD. Large beverage makers are telegraphing a move into CBD with CBD infused drinks. New Age Beverages (NASDAQ: NBEV) is the apparent leader selling 1.125 million cases of Marley Mellow Mood representing $29.3 million in annual net sales. CBD has turned into a wellness product that is not only used in drinks but also cosmetics, soaps, and shampoos. With the tailwind of the Farm Bill it’s prudent for investors to look at the best of breed stocks in the Hemp market that will eventually benefit from consolidation. Hemp is still in its infancy with only 78,176 acres planted in 2018.
Hemp Market Size – Tiny
There are 41 states with Hemp Bills where the plants are regulated. In 2018, 78,176 acres were planted and this was up almost 3 fold from 25,713 acres planted in 2017. On average the states are only planting 2,000 acres of Hemp. Putting this into perspective the average size of a wheat farm is 442 acresso it follows that if 5 wheat farms were repurposed in each state that would equal the current production of hemp planted in 2018. These tiny numbers still represent a relatively untapped market because there are 2.06 million farms in the United States, and 911 million farmable acres. The acreage planted in 2018 represents only a pittance of the future market. The point of this illustration is to see just how tiny the market is now and understand how large it may become in the coming years. The hemp market is in its infancy so investors should be viewing this as a ground floor opportunity.
Hemp Market Potential & Fragmentation
Lower end estimates suggest the U.S. hemp-based CBD market will grow from $390 million in 2018 to $1.3 billion by 2022 according to New Frontier Data’s Hemp Business Journal projects. This means the compounded annual growth rate could be (CAGR) of 27.2%. However, cannabis market research company Brightfield Group estimates that the hemp CBD market in the U.S. will skyrocket to $22 billion by 2022. Independent research analyst Cowen estimates $16 billion by 2025. The huge spread between these estimates should reinforce to investors how early they are in the cycle. There is a tremendous reward possible looking at the macro view.
It’s difficult to fathom how complex the cannabis ecosystem can be. Complexity eventually translates into risk and risk into uncertainty. So for investors just getting started in the cannabis market the purest sector with the highest predictability is the cultivation market. All farming will eventually be commoditized so it’s all about scale and being the lowest cost producer. Biotechnology and medicinal use is at the other end of the spectrum. It’s the most complex sector that will ultimately deal with state legislature and the FDA. Medical claims are certain to face regulatory scrutiny and any number of innovations in pain management could have dire consequences in the CBD market. The edibles which include beverage makers have their own challenges of scale and distribution. The real estate market is primarily affected by zoning, licenses, and the state legislature. The quantity of state licenses and licensing requirements affect the profitability of the enterprises and demand for the properties and locations. The most profitable segment of the market are the distillates (oils) and isolates (crystals). It takes capital equipment to make the oils and many are flocking into the business which will eventually drive pricing down. The agriculture technology business revolves around farming and harvesting the crop and different ways to grow it hydroponically in greenhouses or outdoors.
Subsector LeadersThe dominant name is Canada is Aurora Cannabis Inc. (NYSE: ACB) with over 600,000 kg of marijuana produced annually. In biotech the dominant leader is GW Pharma (NASDAQ: GWPH) with a $5.1 billion market cap. It has become the undisputed leader after they received FDA approval of Epidiolex for the treatment of epilepsy. In the agricultural technology sector Smart Cannabis Corp. (OTC: SCNA) is the leader manufacturing the most technologically advanced greenhouses. Leading the retail markets are both Cronos Group Inc. (NASDAQ: CRON) and Tilray Inc. (NASDAQ: TLRY).
Charlottes Web Holdings (OTCQX: CWBHF)is the leader is CBD oil sales and has what is called full spectrum CBD. Their CBD oil contains terpenes which are fragrances that bind to certain receptors in the body and flavonoids which also have purported health benefits. The CBD oil contain different type of cannabinoids like CBD, CBA, CBD, CBC, CBN and about 80 other phytocannabinoids that are a part of the human body’s receptor network. Their niche is the health and wellness and they grow hemp specifically for their supply line of CBD oil. The company has hemp farms in Colorado, Kentucky, and Oregon. They also have a very extensive line of CBD for canine health and wellness.
Village Farms International (NASDAQ: VFF)has perhaps the largest greenhouse capacity in the cannabis sector. This company has embarked on a strategy of conversion of their existing grow facilities to cannabis in response to market demand. Some of their greenhouses and work crews have been together for almost 20 years and cannabis is just another crop to them. This company has an amalgamation of products and there is a very good chance that you have eaten produce grown in one of their greenhouses. In Canada a portion of their greenhouse space has been converted to cannabis but in the USA it is still full scale food production. In the USA they are stressing flexibility and plan to grow more hemp in the states they have a footprint in like Texas once the legality issue is settled. This is where their largest greenhouse is located. For the most part they are better positioned as a cannabis play versus a hemp play but they do have acreage and production.
MYM Nutraceuticals (OTCQB: MYMMF)is a global leader in Hemp with operations in the USA, Canada, Mexico, Columbia, and Australia. They are not the largest domestic producer, but have a sizeable foothold in the United States which positions them well to take advantage of any potential acquisitions. In terms of technology, they have positioned themselves as a leader in developing the optimal strains for different growing conditions. As it turns out seeds, not clones produce the most robust plants and biomass. Their global footprint with operations in the USA, Canada, South America, and Asia Pacific are a key drivers of their business opportunities which means future operations could involve Europe, Africa, and Asia. Consistency and reliability of the brands are key components that customers are looking for in a global brand. The management team has renewed focussince the hiring of the new CEOHoward Steinberg. Their growth strategy revolves around 4 key processes.
Their marquis operation with an expected production of 3,000 acres over the five years is located in the Navajo Nation in New Mexico. In 2019 they are starting off with 150 acres and expect this to be job creator for hundreds of Navajo farmers in this depressed economy. At full capacity this operation should produce 13.7 million kilograms of biomass. In Nevada they have a partnership with Elite Ventures to develop 125 acres of hemp. The historical yield levels of this farm has been between 10 – 19%. Traditional yields in the industry are 10% so this particular farm is something special if it continues to operate at the upper end of the yield. Estimated production is 54,000 kg of biomass with translates into $26 million in sales before the partnership split.
The company also has a 1.5 million SF greenhouse project in Weedon Canada which has been submitted to Health Canada. When approved it has the potential to be one of the largest cannabis production facilities in Canada making them a potential takeover candidate to one of the large NASDAQ conglomerates like Cronos (NASDAQ: CRON), Aurora Cannabis (NYSE: ACB) or Canopy Growth (NYSE: CGC).
Hemp Inc. (OTC: HEMP)is probably one of the oldest publicly traded hemp companies dating back to 2008. Since hemp has so many uses this company has been reticent to change its business model of supplying hemp as insulation and clean up material for oil spill cleanup. Most of its peers grow hemp for conversion to CBD oil but they have long established specialty markets and seem content in growing these market lines versus CBD oil. They have also found a niche teaching others how to grow hemp. They have a price to sales ratio of 10 and given their longevity in the business that seems to be a minimum multiple for stocks to trade at.
Global Hemp Group Inc. (OTC Pink: GBHPF)has operations in both the United States and Canada. Their cultivation projects are in New Brunswick, Canada and Oregon. Their vision is based on creating a Hemp Agro-Industrial Zone (HAIZ) which would allow them to capitalize on the various uses of hemp. They want a sustainable operation where they grow seeds, produce hemp for clothes, make building materials, and make full spectrum oil for medical purposes. They appear to be growing operations organically and taking profits from the last harvest and investing in growing clones to create additional acreage. This is clearly a story for the patient investor that can take solace in the fact that the company does have sales and is growing albeit at an organic trajectory.
Integrated Cannabis Solutions (OTC Pink: IGPK)is definitely a pure play on hemp growing but they only have 15 acres being planted this year. This is a pilot operation in Wisconsin with larger scale growth the following year. They plan on co-locating the CDB processing plant on the farm. This company has a veteran management team that appears to be more focused on the processing side than the grow operation.
Dakshidin Corp. (OTC Pink: DKSC) is really known as Whitechapel holdings. They are a wellness company focused on the medical aspects of CBD oil. Their grow operations are meant for their own consumption as they want only the best organically grown CDB to be used with their mix of products. They are more of a brand company that is catering to the over 45+ demographic that is interested in the health and wellness aspects of CBD oil. They use CBD as an enhancer to existing formulations to effect relieve in pain, mood,sleep, and vigor.
Hemp growers are at the core of this land grab opportunity in hemp. When evaluating different opportunities in the hemp space, its vital to understand the growth of acres as a key determinant of future value. Additionally, the growers that are proficient at growing crops and produce consistently high yields of CBD will be the market leaders. Eventually hemp will become highly commoditized as players rush in to take advantage of high isolate pricing, so the more entrenched a player is and the greater market share they can command the more valuable the company. One company stands out from the pack in this subsector of the hemp market and that is MYMMF. They currently have a price to sales ratio less than one when its peers group has a range from 10 to 150x sales. This means that as the company matures and develops sales, valuations could push toward a 10 fold return for investors to be in line with industry averages. In a fast growing commoditized business the safest and most lucrative investments are from the market participants with purchasing power and the lowest cost producer. MYMMF is developing into a global powerhouse that is in a position to acquire other fast growing entities or be part of the future consolidation in the industry once it matures. MYMMF is in the sweet spot riding on the crest of this hemp wave that started with the passage of the Farm Bill. They are extremely undervalued and should eventually achieve a NASDAQ uplisting. We are expecting a 10X multiple of sales as it builds out its 3000 acres in the Navajo Nation property. The 2 year price target is $4.65/share based on a full buildout of its hemp operation. This is the best of breed hemp play in this sector with a global diversification strategy.
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