Health Canada expects the country’s medical marijuana market to dramatically expand over the coming years, growing from 22,000 patients in 2012 to more than 450,000 by 2024, representing a nearly 30% compounded annual growth rate. In dollar terms, the federal agency expects the market to reach approximately $1.2 billion in size, as the market moves from primarily home-growing to industrialized growers approved under the MMPR.
Investors looking to capitalize on these dynamics have many different options, including established producers, like Tweed Marijuana Inc. (TSX-V: TWD) (OTC: TWMJF) and OrganiGram Holdings Inc. (TSX-V: OGI) (OTC: OGRMF), along with many more aspiring licensed producers and ancillary product or service providers, like Abattis Bioceuticals Corp. (CSE: ATT) (OTC: ATTBF) and Calyx Bio-Ventures Inc. (CSE: CYX), among others.
In this article, we’ll take a look at Abba Medix Group Inc. (CSNX: ABA) (OTC: SARSF) and its diversified play within the country’s hottest new market.
Established MMPR Licensed Producer
Abba Medix Group made a big entry into Canada’s medical marijuana market with the acquisition of RedeCan Pharm in May 2015. As a licensed producer of medical marijuana under Canada’s MMPR program, Redecan Pharm is one of only seventeen producers focused on developing premium quality medical marijuana products for Canadian patients in a fully secured 15,000 square foot greenhouse facility located in Niagara, Ontario.
With Canada’s medical marijuana patient population set to expand to more than 450,000 individuals by 2024, the company is well positioned to capture a large number of early customers as one of just 17 authorized companies in the space. These advantages could become increasingly apparent over the coming quarters as the regulatory environment surrounding the country’s medical marijuana industry becomes a lot clearer.
The company also appears to be trading at a favorable valuation based on this business segment alone. According to TMX Money, the stock trades with a market capitalization of just C$28.2 million, which is substantially less than many other publicly traded MMPR licensed producers. Tweed Marijuana trades with a market capitalization of C$91.7 million, for example, which is more than double the company’s valuation, despite the similarities.
Diversification into Vaporizers
Abba’s acquisition of Blow Vapor back in April 2015 has provided shareholders with exposure to much more than just the cannabis industry. Blow Vapor is a leading manufacturer, marketer, and distributor of electronic cigarettes, e-liquids, and vaporizers, which provide exposure to the U.S. marketplace via a U.S.-based subsidiary, while opening new channels with its nicotine-based products, and its electronic hookah patent.
According to Technavio, the North American e-cigarette market is expected to reach nearly $3 billion by 2018, representing a 25.41% compound annual growth rate. Blow Vapor’s focus on developing truly unique products – rather than clones of existing products in the market – create a very real opportunity to capture a significant part of that market. Notably, the patents covering these products also create valuable intellectual property in the space.
Publicly-traded vaporizer companies, like Vapor Corp. (NASDAQ: VPCO) and Electronic Cigarettes International Group Ltd. (OTC: ECIG), are trading independently with market capitalization of around $20 million. Of course, many competitors in the space are focused primarily on replicating existing products with the hopes of competing against larger tobacco brands rather than trying to develop new and innovative products in the space.
Abba Medix represents a compelling investment opportunity within the cannabis industry given its already-approved MMPR business and its high-potential vaporizer business. With existing MMPR licensed producers trading for upwards of C$90 million and vaporizer stocks trading at around $20 million, the company’s modest C$28.2 million market capitalization could represent a true bargain that remains undiscovered by many investors.
Investors in both the Canadian MMPR space and the vaporizer space may want to take a closer look at the stock. As the market begins to realize this potential, the stock could see significant upside from its current levels as revenue gains begin to be recorded.
For more information, visit the company’s website at www.abbamedix.com.
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