INDIVA Ltd may be trading next week, it is time to take a look at their website www.indiva.ca if you are an investor or specialized broker because this is a company with all the fundamentals to make a mark on the Cannadian Cannabis sector. INDIVA will be launching on the TSX venture exchange, pending RTO closure with Rainmaker Resources Ltd (V:RIR).
Pictures of INDIVAs state-of-the-art London, Ontario facility and a quick look at their well conceived products and award-winning Master Grower Pete, clearly demonstrate advantages late comers like INDIVA have while entering into the Canadian cannabis arena. Collecting some of the brightest talent from every industry, INDIVA is using a calculated and experienced branding approach to the chaotic world of cannabis production. Looking at how their branding of genetic scrutiny, high quality growth and client care sets them apart, it is important to look at who else has been successful in taking a similar route.
While it is difficult to find publicly listed cannabis companies that are still working the controlling-perfectionist method, by designing facilities from scratch, and testing their modular process in-house for quality control before expanding it to the full footprint. It is much easier to find those without a plan anymore, opting to seek M&A interactions, especially in the late stage companies in this expansionary period. This is indicated by account of recent M&A releases, such as seeing insider bleeding by Aurora (ACB) alongside their hostile take-over bid aimed at CanniMed (CMED). Meanwhile CanniMed (CMED), is concurrently in the process of acquiring Up Cannabis Inc. by acquisition of Newstrike Resources (V.HIP), branding the move the birth of a “Premier Global Cannabis Company” in a webcast on Nov 20, 2017. One must wonder how brand consistency plays in – when an entity is made up of so many different companies.
In their defence, many of these early cannabis companies started out in climates of great uncertainty betting on the outcome of government decisions is never easy, so it is understandably difficult to forge concrete plans while remaining competitive. This resulted in the “winners” being those who were least tied up, refining their ability to move first on opportunistic equity and market movements. Now with far more certainty in government taxation and recreational demand forecasts, opportunistic investment is now pushing the industry faster than ever. Idle cash on the majority of balance sheets indicate directors are having difficulty finding new opportunities that scale with the business. Shareholders have been adding to the problem by further rewarding management as they look for growth by sheer volume, attempting to buy out licensed square-footage left-and-right and making agreements to stream any raw legal cannabis they can turn a profit on. By processing the raw cannabis into oil concentrate, large companies can remove some inconsistencies between batches of each stream of harvested cannabis.
Some newer companies are making entry into the sector, seeing all the missteps of others before them, marketing extremely concise brands directly aimed at current market gaps. They are working quietly to expand at a rate that does not jeopardize their product remaining best in class, nor their growing client base that are willing to pay for the “good stuff”.
Few quiet growth companies are left in the publicly traded arena, looking at a basic debt to equity ratio of a basket of cannabis producers, only few were greater than 0.5. Supreme Pharm. (V:FIRE) being one outlier with a 0.62 D/E ratio held two quarters in a row; Supreme is well known for dancing to its own tune. They are even proud to state one of the highest cost per gram in the sector at $2.50 produced, also jesting that clients don’t ever walk into a room of users and ask “Hey, whose got the cheap stuff?”. Making a point that many major cannabis companies are finding better immediate return on concentrated oils made out of mass produced far lesser quality cannabis. Like Supreme, INDIVA Ltd Canadian Cannabis Company intends to take aim at the high quality dried flower product sector. With the launch of INDIVA Ltd next week, one can anticipate that new investors will catch on to the unrealized value in the gaps being left behind. Coupled with all the M&A action, there is an interesting connection when looking at the abundance of cash sitting idle in the majority of bigger players who indicate they are running out of organic plays to keep up. Look out.
Ones best bet might be to find plays that benefit from both short term M&A potential and the long term brand faith. In the cannabis sector, this may mean putting the brand and client first, ensuring consistent quality, and even smell, that clients can identify at any outlet globally. We trust what we know is the same everywhere we go, especially overseas; Burger anyone?
The author of this article has been contracted and compensated by INDIVA Ltd. to research and promote any findings to the public.