North Bud Farms Inc. (CSE: NBUD, OTCQB:NOBDF) is on its way to becoming a highly recognizable corporation in the multi-billion dollar cannabis industry. Headquartered in Toronto, Canada, the company has established one of the biggest cannabis production pipelines. Backed by low-cost purpose-built cannabis production facilities, the company is on its way to generating $17.5 million in revenues by 2020.
Highlights
- Completed 24,500 ft2 indoor facility able to produce 1,000 kg of cannabis a year with estimated revenues of $4 million
- Completed 800,000 ft2 outdoor facility able to produce 13,500 kg of cannabis a year. Estimated revenues of $13.5 million.
- California expansion with the acquisition of a cannabis farm consisting of a 300,000 sq. ft. greenhouse
- Nevada Expansion with NBS acquisition
North Bud Farms has achieved significant milestones as it seeks to produce cannabis products to take advantage of strong demand in the burgeoning North American cannabis market. Strategic investments south of the border have come into play, as the company looks to entrench itself in some of the biggest and fastest-growing cannabis marketplaces in the world.
U.S Expansion Drive
The establishment of a U.S based subsidiary, Bonfire Brands, has set the ball rolling as the company moves to enhance its pursuit for growth opportunities in the U.S cannabis landscape.
California, being the world’s biggest cannabis marketplace in the world, has caught the attention of North Bud Farms management. Likewise, the team has struck a deal for the acquisition of an 11-acre property in Salinas that will act as the base for the company’s California operations.
The acquisitions grant the company access to a cannabis farm consisting of a 300,000 square ft. greenhouse. The facility is currently operating and on course to generate 12,000 kg a year of the cash crop while only operating at a fifth of its potential capacity.
Expansion into California comes months after the company made its presence felt in Nevada with the acquisition of Nevada Botanical Science. With the acquisition, the company gained access to medical and adult-use licenses, ideal for launching cultivation, extraction, and distribution of cannabis products in the state.
By setting base in Nevada, the company exposes itself to one of the biggest recreational cannabis markets in the world. Recreational sales in the state clocked highs of $580 million in the first year of legalization.
Canada Cannabis Opportunity
Even on setting sight on the U.S Cannabis market, North Bud Farms continues to strengthen its operations in Canada, a market poised to reach the $5 billion mark in sales by 2021. The company has already completed Phase one of its 24,500 indoor cannabis cultivation facility in Low Quebec.
The cost-effective facility is on course to generate 1000 kg of cannabis a year, which should allow the company to generate as much as $4 million in revenues on selling each gram at $4. Plans are also underway to expand the facility to include an 800,000 sq. ft. outdoor cultivation, which should take production capacity to about 13,500 kg worth of cannabis per year.
By selling, each gram produced at the outdoor facility at $1 a gram then North Bud Farms should be able to generate a cool $13.5 million in revenues with the expanded production capacity.
Ramping up of cannabis production is necessitated by the fact that Canada is on its way to legalizing cannabis edibles as well as CBD infused beverages. Legalization 2.0 promises unique opportunities for growth, given the expanded target market.
In a bid to shrug off competition and generate significant value, North Bud Farms intends to target a cannabis market currently not supplied. Leveraging with its superior quality and competitive price, the company’s target market will be more than 70% of consumers that rely on ‘grey and black’ markets valued at $3 billion for cannabis supplies.
Bottom Line
North Bud Farms is well-positioned to take advantage of the developments as well as emerging opportunities in the North American cannabis marketplace. Robust production capacity should allow the company to enjoy economies of scale once it has hit the market with its first crop and products in 2020.
An opportunity has presented itself as the company’s shares have experienced a recent pullback after an impressive run in the first quarter of the year. Amidst the natural current of the market, the company’s underlying fundamentals have continued to edge higher, given the strategic investments made in Canada and the U.S.
As it stands, the company is trading at less than 1X its projected 2020 revenue with a market cap of about $15 million. On the risk-reward frontier, the company boasts of tremendous potential as a low-cost cannabis company.