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Friday, December 4, 2020

The Bullish Thesis on Auxly Cannabis Group Inc (OTCMKTS:CBWTF) Pays Off

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Just a few days ago, we said we thought Auxly Cannabis Group Inc (OTCMKTS:CBWTF) was worth a fresh look because we thought that “new money sitting on the sidelines, interested in the space, and searching for ostensible value” might find something very enticing in this particular stock, given what we believed was under the hood, and how it has been chronically overlooked on momentum moves in the larger cannabis patch. Fast forward just a few days, and new money that took that advice is already up a healthy 25%.

This is mostly because another company – Imperial Brands PLC – saw the same value. Imperial just decided to invest approximately $123 million in Auxly by way of a convertible debenture and grant Auxly global licenses to Imperial Brands’ vaping technology and access to its vapor innovation business, Nerudia. “This investment from Imperial Brands will enhance Auxly’s ability to continue to deliver on our business plans and accelerate our growth initiatives to expand our portfolio of branded derivative products,” said Hugo Alves, President of Auxly. “The timing is ideal as we prepare to bring our portfolio of innovative cannabis products to the Canadian market following the legalization of edibles, extracts, and topicals later this year.”

Auxly Cannabis Group Inc (OTCMKTS:CBWTF) trumpets itself as an investment company that seeks to provide investor returns through streams and capital appreciation in the Canadian cannabis industry.

The company operates as a cannabis streaming company. It provides funding for cannabis facility expansions, operations, and initial construction in exchange for minority equity interests and a portion of the cultivation production.

The company was formerly known as Knightswood Financial Corp. and changed its name to Cannabis Wheaton Income Corp. in May 2017. Cannabis Wheaton Income Corp. was incorporated in 1987 and is based in Vancouver, Canada, and became known as Auxly Cannabis Group Inc over recent months.

According to company materials, “Auxly Cannabis Group is a collective of entrepreneurs with a passion for the cannabis industry past, present and future. Our mandate is to facilitate growth for our partners by providing them with financial support and sharing our collective industry experience. Our partners all have different visions, voices and brand values, and all share a common goal—to build a world-class industry based on ethics, diversity, quality and innovation.”

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As noted above, CBWTF just announced that Imperial Brands PLC will invest approximately $123 million in Auxly by way of a convertible debenture and grant Auxly global licenses to Imperial Brands’ vaping technology and access to its vapor innovation business, Nerudia.

Recent action has seen 25% during the past week in terms of shareholder gains in the listing. In addition, the stock has seen a growing influx of trading interest, with the stock’s recent average trading volume running 55% over what the stock has registered over the longer term.

Chuck Rifici, Chairman and CEO of Auxly, added: “Following its extensive evaluation of the Canadian cannabis market, we’re thrilled that Imperial Brands selected Auxly as its partner of choice due to the high caliber of our assets, people and capabilities. We are particularly excited to partner with Imperial Brands on current and future intellectual property and product development, starting with immediate access to its portfolio of vaping technologies and research and development capabilities.”

At this time, carrying a capital value in the market of $340M, CBWTF has a significant war chest ($168.4M) of cash on the books, which is balanced by about $115.4M in total current liabilities. One should also note that debt has been growing over recent quarters. CBWTF is pulling in trailing 12-month revenues of $2M. In addition, the company is seeing recent top-line growth, with sequential quarterly revenues growing at 26.3%. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $CBWTF 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 $CBWTF, either long or short, and we have not been compensated for this article.

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