ORGANIGRAM HLDGS I COM NPV (OTCMKTS:OGRMF) has been on a roll along with other players in the Canadian cannabis patch. We have covered several other stocks swimming in exactly the same pond over recent days, and all have been catching some big upside. Part of it may have to do with the Canadian government starting to approve intercontinental exports of dried cannabis flower. But we also see some clear causality in OGRMF’s recent announcement that it has entered into a memorandum of understanding with the New Brunswick provincial authority for the distribution of marijuana to the adult-use recreational market (why on Earth the government would be making deals to supply recreational pot is another matter).
According to the release, “through the MOU, New Brunswick secures a supply of at least 5 million grams of recreational marijuana per year from Organigram. The MOU, one of the first in Canada, is the result of positive, productive and ongoing consultation between the Government of New Brunswick and the Company.”
ORGANIGRAM HLDGS I COM NPV (OTCMKTS:OGRMF) trumpets itself as a company that produces and sells medical marijuana in Canada. The company was founded in 2013 and is based in Moncton, Canada.
According to company materials, OrganiGram Holdings Inc. is a TSX Venture Exchange listed company whose wholly owned subsidiary, OrganiGram Inc., is a licensed producer of medical marijuana in Canada. OrganiGram is focused on producing the highest quality, condition-specific medical marijuana for patients in Canada.
OGRMF’s facility is located in Moncton, New Brunswick and the Company is regulated by the Access to Cannabis for Medical Purposes Regulations.
According to company materials, “From the day we started back in 2013, it’s been about making lives better – for our clients, our people, and our community. We’re based in Moncton, New Brunswick, the heart of the Maritimes, but at OrganiGram Holdings we’re committed to improving the quality of life for Canadians across the country. For us, this means working with health-care providers and industry organizations, supporting research and education, and providing a safe, effective product. To be effective in that last goal, we made a decision to produce organic cannabis. Growing certified organic medical cannabis isn’t easy, in fact, most licensed producers won’t take this on. It means more care, more testing, more rules… but in the end, it means a product that we feel delivers on our goals in the best way. And improving the quality of life for Canadians is not just about getting safe, quality product to them effectively. It’s about creating jobs, being good neighbors and contributing to our community.”
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As noted above, OGRMF has been running with the group as the market speculates on higher overall market pricing due to some new avenues of demand. But we also see some company-specific catalysts in play here with the company’s announcement of a deal to supply to the local governmental system in the purview of the recreational marijuana market.
“We are excited to enter into this MOU with the Province. The Government of New Brunswick has established itself as a leader in the developing marijuana industry, working to ensure that the industry develops in a responsible and effective manner. New Brunswick’s stewardship on this file has been recognized throughout Canada and we are proud to work closely and support them as a strategic partner,” says Greg Engel, Organigram’s Chief Executive Officer.
One point to make here: we are baffled by the fact that the provincial government has any need of purchasing recreational use marijuana. Would a government purchase beer and wine for the community? The point of this deal is a bit on the elusive side.
Earning a current market cap value of $223.75M, OGRMF has a significant war chest ($2.7M) of cash on the books, which is balanced by about $371K in total current liabilities. One should also note that debt has been growing over recent quarters. OGRMF is pulling in trailing 12-month revenues of $5.4M. In addition, the company is seeing major top line growth, with y/y quarterly revenues growing at 6.1%. As more color becomes clear on the name, we will review the situation and update our take. Sign-up for continuing coverage on shares of $OGRMF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $OGRMF, either long or short, and we have not been compensated for this article.