- Beacon Securities Limited argues that Sunniva’s Canadian greenhouse alone is worth more than its entire market cap
- California facility, Canadian cannabis clinics add to company’s value
- Sunniva also bolstered by agreement with licensed producer Canopy Growth Corp. amid heightened M&A activity in cannabis sector
Cannabis supplier Sunniva Inc.’s (CSE: SNN) (OTCQX: SNNVF) strengthening foothold in California’s and Canada’s consumer-populated markets has been failing to translate to its stock price and market cap since it began trading on the Canadian Securities Exchange and the U.S. OTCQX® Best Market in January, leading investment researchers at Beacon Securities Limited (http://ibn.fm/K5a88) to classify Sunniva’s public offering as a “badly mispriced” listing that could reward investors who buy in at undervalued levels reported at the time of its July 30 market update, titled ‘Sunniva Inc. (CSE: SNN) California Dreams Have Never Been This Cheap’.
Beacon Securities argues that Sunniva’s assets in Canada are worth more than the company’s entire current $180 million market cap and that its near-commercialization property in California is effectively being given zero value, “or, in fact, negative — a proposition that is ludicrous given the imminent launch of its 489,000 SF greenhouse (with on-site dispensary and distribution license) in the world’s largest cannabis market in California.”
The company’s Canadian assets include a 740,000-square-foot greenhouse in British Columbia that has been permitted and has solidified a take-or-pay agreement with licensed producer Canopy Growth Corp. (TSX: WEED) (OTC: TWMJF) for 45 percent of its output. Beacon notes the heightened pace of merger and acquisition transactions in the cannabis marketplace and opines that it would not be surprising if Canopy buys Sunniva’s Canadian assets just to secure a quality production pipeline.
Beacon anticipates a potential valuation of $250 million for Sunniva’s facility in the community of Okanagan Falls, an unincorporated area 45 kilometers (28 miles) north of the U.S.-Canada border, and it adds the $10 million of yearly revenue generated by Sunniva’s seven medical clinics that could be vertically integrated as a distributor of the facility’s production.
“In summary, we believe the current market cap of Sunniva reflects neither the value of (its) Canadian or US assets. With M&A heating up in both Canada and the US, we believe investors will be rewarded upon buying shares at current levels, especially given the leadership team’s significant experience in maximizing shareholder value,” Beacon’s report concludes.
CEO Anthony Holler told industry trade magazine Public Entrepreneur that the Cathedral City, California, operation should begin production in the third quarter of this year, with the possibility of delivering its first crop before year-end, even before it achieves full-scale operation (http://ibn.fm/edVkx). Notably, the company is good manufacturing practices certified, which also gives it gravitas with international markets.
For more information, visit the company’s website at www.sunniva.com
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