48North Cannabis Corp: Canada’s Largest Outdoor Cannabis Farm Could See Shares More Than Triple

48North Cannabis Corp Set to Open One of World’s Largest Outdoor Growing Op

Under-the-radar 48North Cannabis Corp (OTCMKTS:NCNNF, CVE:NRTH) is a story about opportunity. NCNNF stock has made strong gains over the last 52 weeks, climbing 133%. 48North Cannabis stock is also up 52% year-to-date, around $0.66.

However, those gains are just the beginning. The Toronto, Canada-based company recently announced that it was approved to open one of the world’s largest legal outdoor cannabis operation, poised to produce over 88,200 pounds.

Virtually overnight, 48North expanded its annual expected capacity from 11,025 pounds to over 99,200 pounds. And better still, the outdoor-grown weed is expected to be the lowest cost per gram in Canada.

48North Cannabis Corp Overview

48North Cannabis Corp is a seed-to-sale cannabis company that is focused on the health and wellness market through cultivation and extraction.

Its expanding portfolio of bands includes “Latitude,” a women’s cannabis platform; “Mother & Clone,” a rapid-acting sublingual cannabis nanospray; and “Avitas,” a single strain vaporizer cartridge.

The company operates three different growing facilities. Two of its indoor-licensed cannabis production sites (Kirkland Lake and Brantford, Ontario) have an annualized production capacity of roughly 11,025 pounds. (Source: “ Investor Presentation – May 2019,” 48North Cannabis Corp, last accessed June 3, 2019.)

Its 100-acre organic cannabis farm, “Good Farm,” is home to 250,000 marijuana plants. The farm is expected to produce over 88,200 pounds of sun-kissed organic cannabis.

Good Farm is also associated with three major supply agreements with the Société québécoise du cannabis, the exclusive distributor of cannabis in Quebec; the Alberta Gaming, Liquor and Cannabis Commission; and Canadian cannabis accessory company humble+fume.

On May 17, the company announced that it received its outdoor cultivation license from Health Canada for its organic farm. The license allows 48North to harvest in excess of 99,200 pounds of dried cannabis in 2019 from its three facilities. (Source: “48North Approved to Open One of the World’s Largest Licensed Outdoor Cannabis Operations,” 48North Cannabis Corp, May 17, 2019.)

This will help 48North position itself to be a global leader in the production of low-cost, high-quality “next-generation” products that will be legalized in Canada later in 2019.

Most legal cannabis operations are forced to grow their plants indoors. Planting marijuana outdoors allows 48North Cannabis Corp to take advantage of the humid Ontario summers, producing larger and taller crops, which could give NCNNF stock more appeal than its peers going forward. (Source: “Canada’s largest outdoor cannabis farm ready for growth,” CTV News, May 29, 2019.)

Proprietary Products

The market share for cannabis flower has fallen to near-parity with sales of next-generation products, tumbling from 66% in 2015 to 40% in 2018. At the same time, the share for concentrates has increased from 16% in 2015 to 39% in 2018.

This creates a significant opportunity for North48 to capitalize on cannabis-infused products including topicals, vape pens, cosmetics, edibles, and beverages.

(Source: “48North Cannabis Corp. (NCNNF),” Yahoo! Finance, last accessed June 3, 2019.)

Third Consecutive EBITDA-positive Quarterly Results

On May 20, North48 Cannabis Corp announced third-quarter revenue of $689,302 and year-to-date revenue of $4.3 million, compared to nil in both prior-year periods. (Source: “48North Cannabis Corp. Announces Third Consecutive EBITDA-positive Quarterly Results, Receives License from Health Canada to Operate One of the World’s Largest Cannabis Farms,” 48North Cannabis Corp, May 20, 2019.)

The company reported a third-quarter net loss of $1.5 million, or $0.012 per share, compared to a loss of $3.4 million, or $0.06 per share, in the same prior-year period.

North48 reported a year-to-date net loss of $3.4 million, or $0.035 per share, versus a loss of $7.1 million, or $0.12 per share, in the first nine months of 2018.

North48 maintained positive earnings before interest, taxes, depreciation, and amortization (EBITDA) for the third consecutive quarter, with third-quarter EBITDA of $78,000. This represents a 570% sequential increase.

For the nine months ended March 31, EBITDA was $696,000, compared to a loss of $4.4 million for the comparative period in 2018.

Inventory increased from $928,000 at December 31, 2018 to $2.5 million as of March 31, 2019 as the company positions for the next-generation product market expected to arrive this fall.

Cash and cash equivalents in the third quarter was $18.0 million, compared to $12.2 million on June 30, 2018.

“48North successfully achieved all of the milestones it targeted in Q3 and is therefore well on its way accomplishing its goal of delivering next-generation products for fall 2019. This included receiving its outdoor cultivation licence from Health Canada for its Good Farm,” said Alison Gordon, co-CEO of 48North.

Analyst Take

Thanks to a historic first-mover advantage with its 100-acre outdoor cannabis farm, 48North Cannabis Corp is poised to take a huge step ahead of its competition.

As the only licensed producer in Canada with an outdoor cultivation site, and given seasonal realities, 48North will maintain this advantage until at least the 2020 growing season.