Trading Opportunity: Emerald Health Therapeutics (EMH.VN)

October 9, 2019

Dear Manager,

Please read on to learn more about a new and exciting opportunity for you and your traders.

Emerald Health Therapeutics (EMH.TO)

Sector: Cannabis | Industry: Licensed Producers | Market Capitalization: $245 million

Company Description: Emerald Health Therapeutics is a vertically integrated Canadian licensed producer of cannabis, focusing on developing proprietary cannabis products for medical and adult use customers.

Emerald Health Investment Holdings:

  • 100% owner of Emerald Health Therapeutics: 156,000 square feet of high-quality organic flower production in the greenhouse and 10,000 feet of breeding, genetics, and R&D lab all in B.C.
  • 100% owner of Avalite Sciences: 4,000 sq. ft. analytical testing/R&D/product innovation facility in Quebec
  • 51% owner of Emerald Naturals: an industrial scale extraction for hemp and natural products, soft gel, encapsulation, and formulation
  • 50% owner of a JV in Pure Sunfarms: 1.1 million square feet of low-cost greenhouse cannabis cultivation with 75,000 kg of planned annual capacity based in B.C.
  • 100% owner of Verdelite: 88,000 square feet of vertically integrated facility with expertise in craft growing, with new product and innovation hub

Investment Thesis:

  • EMH is targeting a large marijuana market in Canada for both medical and recreational users—the market size for the recreational market has been pegged at approximately $5.5–$5.8 billion and the medical market at $1.8 billion in just Canada alone.
  • EMH has approximately 175,000 kg of expected capacity which is more than the likes of the larger market cap companies such as Hexo, OGI, Cronos, and Tilray.
  • Through their Pure Sunfarms JV, EMH produces cannabis at a fraction of the cost in comparison with competitors, which sets them for long-term dominance in the Canadian market.
    • Pure Sunfarms top line in Q2 2019 was $37.2 million, increasing by 158% QoQ and EBITDA was at $25.3 million, increasing by 488% from the prior quarter
  • EMH’s focus in the pharmaceutical market with Avalite Sciences and Verdelite allows for value-added products in the long term, allowing both sustainable pricing power and margin expansion
    • In addition, founder Avtar Dhillon is a life science entrepreneur with over 35 years of experience. Dr. Dhillon, who has an MD from the University of British Columbia, has founded dozens of life science companies and has raised more than $1B in public and private financings.
  • Compared to Village Farms, EMH has more cultivation facilities, including an indoor craft cannabis facility in Quebec (as well as cannabis cultivation square footage), a hemp harvest CBD production in Manitoba, and has also invested into creating a medical cannabis hub operation. Contrary to the fundamentals, EMH is trading at a ~70% discount to the market cap of Village Farms. EMH also boasts scientific capabilities and background, whereas Village Farms focuses on cultivation alone.

Recent News:

Emerald Health Therapeutics’ Joint Venture Pure Sunfarms Launches Branded Product Line, Introducing Eight Products for the Recreational Market, and Begins Shipping to Ontario Cannabis Store

Be sure to tell your traders about this opportunity!

Let us know if you have any questions or comments by creating a mojo.

Regards,

Communications Team

*Remember to access our PPro8 Wiki and Knowledge Base to learn more.

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