Over the last year, Canada has strengthened its position as the global cannabis leader and we do not expect this to change anytime soon.
While markets like the United States and Germany are attractive, Canadian based companies are already highly invested and levered to these markets and are positioned to gain from the advancements of these markets.
Canadian cannabis stocks have benefited from the continued success and we are very excited by this long-term opportunity. Although Canadian cannabis stocks are up a considerable amount in the last year, we continue to see several undervalued opportunities.
One company that we believe is flying under the radar is CROP Infrastructure Corp. (CROP.CN). The company is structured similarly to a Real Estate Investment Trust (REIT): a company that owns, operates or finances income-producing real estate.
An Underappreciated Cannabis REIT.
CROP is focused on the burgeoning legal cannabis industry and we are favorable on this opportunity. CROP operates an attractive business model which is focused on leasing real estate and providing equipment as well as its expertise in exchange for a 30% management fee. The company invests in income-producing property and agricultural equipment to service the growth of the cannabis industry.
CROP is focused on the cananbis opportunity in Colorado, California, Washington and Canada, which represents attractive growth markets. The company plans to pursue opportunities throughout North America and is just getting started.
Products produced utilizing CROP’s property and infrastructure may be sold by the tenant’s operating license holder under new or existing brands and distribution networks. CROP offers additional financing opportunities to increase market penetration via enhanced marketing, brand and distributor development.
CROP represents an undervalued opportunity and we think the market cap significantly under appreciates the company’s growth potential. This creates an exciting opportunity and one that we are going to keep a close eye on. If you look at companies focused on the real estate side of the cannabis industry, you will notice that CROP is significantly undervalued. As the company continues to execute, this will change and believe that the company is in the early innings of a major growth cycle.
Washington Mega Greenhouse Is Coming Along Nicely
With phase one construction underway on their Washington State Mega Greenhouse consisting of foundations for twelve purpose-built indoor agricultural canopies encompassing a planned total area of ~44,000 square feet is nearing completion. The first six greenhouses are currently under construction with completion anticipated shortly.
The Company will shortly begin Phase 2 construction of the next group of six greenhouses planned for the property, bringing another 22,000 square feet of canopy online. Completion of the greenhouses as planned will bring the project’s annual tenant production capacity to approximately 24,000 lbs of high quality product.
The Mega Greenhouse project currently benefits from a regional electrical rate of $0.02/kWh USD which based on internal calculations provided by the company’s expert consulting partner, should result in less than $150.00 USD per lb ($0.33 per gram) production costs for it’s tenant growers.
CROP: Early Innings of a Major Growth Cycle
CROP is focused on rapidly growing the size of its property portfolio and this represents a major potential catalyst for the company. Demand for services provided by the company are expected to increase significantly as existing markets continue to grow and new markets open.
We are favorable on CROP’s leverage to a major growth opportunity and will monitor how the company continues to execute. CROP’s portfolio currently consists of 45,000 square feet of revenue-generating canopy and has built the blueprint and framework for an aggressive expansion in 2018.
The cannabis real estate company is led by a management team that has a proven track record of success and we think this stock is flying under the radar. As management continues to execute, the market will take notice and we have CROP on our radar.