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BMO Analysts Initiate Supreme Cannabis

Ryan Allway

March 18th, 2019

Exclusive, News, Top News

The cannabis industry may have been dominated by microcaps a couple years ago, but multi-billion dollar valuations, blue chip investments, cannabis-focused ETFs, and growing analyst coverage is helping it reach a new level of maturity. The wider market is finally starting to realize the cannabis industry’s significant potential in both medicinal markets, as a pharmaceutical alternative, and recreational markets, as an alcohol or tobacco alternative.

BMO Capital Markets analysts Tamy Chen, CFA, and Peter Sklar, CPA, CA, recently initiated coverage of The Supreme Cannabis Company (TSX-V: FIRE) at Market Perform with a C$2.50 per share price target, representing a 15 percent premium to the then-current market price. The analyst sees the potential for a C$3.00 share price with brand traction, accelerating sales, ramping production, and strategic international acquisitions.

Focus on Discerning Customers

Supreme Cannabis has always focused on discerning heavy cannabis users as its core market with premium dried flower that contains a favorable level of terpenes. Management estimates that these users account for just 20 percent of all cannabis consumers, but in terms of revenue, they account for upwards of 80 percent of purchases. Terpene (auroma) profiles play a big role in attracting discerning customers to cannabis flower products.

The company’s 440,000 sq. ft. hybrid greenhouse in Ontario is licensed for 17,500 kilograms per year of dried cannabis production. Management hopes to bring the facility up to full production of 50,000 kilograms per year by mid-2019. With smaller grow rooms and a “whole plant dry” approach, the company’s cannabis products are superior to many competitors using more industrial-scale approaches to mass production.

Currently, the company has been taking advantage of wholesale demand at attractive prices. As the market matures, the company plans to transition itself to become a premium recreational brand, providing sustainable margins over the long term. These efforts are supported by partnerships such as its agreement with Khalifa Kush Enterprises and its line up of KKE-branded products, and the launch of full spectrum cannabis oils and concentrates.

International Expansion Efforts

Supreme Cannabis made a $10 million strategic equity investment to acquire ten percent of Medigrow, a licensed producer based in Lesotho that’s developing a 520,000 sq. ft. greenhouse, in March 2018. These efforts could provide the company with early inroads into Africa’s cannabis market after Lesotho became the first country on the continent to legalize cannabis—and Medigrow is the first cannabis producer to receive a license in the country.

In March 2019, the company also announced a letter of intent with Malta Enterprises that would enable it to produce and process medical cannabis in the country and potentially export to European markets. Most Canadian licensed producers have directly exported cannabis to Europe with EU-GMP certified facilities, but the LOI could pave the way for the import of non-GMP certified cannabis into Malta for distribution across Europe.

Looking Ahead

The Supreme Cannabis Company (TSX-V: FIRE) has made significant progress over the past few quarters. With BMO Capital Markets initiating coverage, the company joins Aurora Cannabis Inc. (NYSE: ACB), Canopy Growth Corp. (TSX: WEED), OrganiGram Holdings Inc. (CSE: OGI) and other industry giants covered by the mainstream analyst firm. Investors may want to take a closer look at the company given this coverage and its progress.

For more information, visit the company’s website at www.supreme.ca.

Disclaimer

The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: https://cannabisfn.com/legal-disclaimer/

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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