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Monday, November 23, 2020

New Valuation Revelations Test Emerald Health Therapeutics Inc (OTCMKTS:EMHTF)

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Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) broke down with the rest of the Canadian cannabis patch on Tuesday after Barron’s put out a cover story suggesting that valuations in the space were unhinged from reality. However, that sober headline will now battle against the company’s announcement that it has filed its audited financial statements and management discussion and analysis for the fiscal year ended December 31, 2017.

“Following the Canadian federal government’s introduction in April 2017 of legislation to broadly legalize adult-use cannabis, Emerald put in motion multiple strategic steps focused on placing the company in the top tier of Canadian licensed producers and pursuing international opportunities,” said Chris Wagner, CEO of Emerald Health Therapeutics. “The company made important leadership hires; took steps to assure significant, secure supply of cannabis via large-capacity production facilities; struck multiple strategic collaborations and investments; leveraged its extensive life science industry expertise to initiate product innovation and intellectual property formation; and added substantially to its treasury.”

Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) trumpets itself as a licensed producer of medical marijuana under the Access to Cannabis for Medical Purposes Regulations, which allows the company to produce and sell medical marijuana and cannabis oils to clients and other licensed producers.

Individuals may become clients of the company by registering with the company through its secure online portal or via telephone after the individual has received a medical document signed by a licensed health care practitioner setting out the daily quantity of dried marijuana, in grams, that the practitioner authorized for the person.

According to company materials, “Emerald Health Therapeutics Inc (OTCMKTS:EMHTF) operates through Emerald Health Botanicals Inc., a wholly owned subsidiary and Licensed Producer under the Access to Cannabis for Medical Purposes Regulations. Botanicals is authorized to produce and sell both dried medical cannabis flower and medical cannabis oil in Canada. Botanicals currently operates an indoor facility in Victoria, BC, and is progressing on expansion plans for a 32-acre property in Metro Vancouver and a partnership with Village Farms, called Pure Sunfarms, utilizing a 25-acre existing greenhouse complex in Delta, BC. Botanicals is one of Canada’s most medically focused licensed producers, with a team highly experienced in life sciences product development and large-scale agribusiness. Its vision is to be a leading provider of cannabis products through its production capabilities, proprietary genetics, value-added products and branding, and superb customer experience. Emerald Health Therapeutics is associated with the Emerald Health group, which comprises multiple companies advancing diverse botanical, nutraceutical and pharmaceutical products that may provide wellness and medical benefits by interacting with the body’s endocannabinoid system.”

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As noted above, shares of the company slid sharply to start the week on valuation concerns. But recent audited financials also show some strong potential. This cross-currents should define the near-term action as we head inexorably toward eventual headlines of full-scale recreational legalization in Canada.

Wagner continued, “We look forward to a transformational year in 2018 with the expected initiation of broad legalized adult-use and our vaulting into the top tier of production capacity, enhanced branding, sophisticated sales and marketing, and progression of our medical product development and patenting plans. We are executing well on the projects we have announced and are assessing an array of potentially impactful new business opportunities.”

In addition, the name has seen increased volume in recent days, with a bump of around 12% above its longer-run average levels during the selloff, suggesting some potential capitulatory shaking of the tree as shares dip under range support levels.

Currently trading at a market capitalization of $380M, EMHTF has a significant war chest ($44.5M) of cash on the books, which is balanced by virtually no total current liabilities. EMHTF is pulling in trailing 12-month revenues of $938K. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 124.8%. This may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $EMHTF 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 $EMHTF, either long or short, and we have not been compensated for this article.

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