CGrowth Capital Inc (CGRA)

[stervc]

CGRA Cannabis/Marijuana License Valuation

Below are valuation thoughts to help one understand the magnitude of what it means for CGRA, through its wholly owned subsidiary Chewelah Properties, LLC, to legally produce and/or process cannabis/marijuana and its byproducts within Stevens County in the state of Washington of which approval was just recently granted per the news below and per the previous news regarding an option for CGRA to purchase the Wildfire Cannabis operations:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121696992
http://finance.yahoo.com/news/cgrowth-capital-inc-executes-commercial-133000700.html

As a worst case scenario, if CGRA do not purchase Wildfire Cannabis, they will receive a Leasing Fee from a Leasing Agreement from Wildfire Cannabis that is anticipated to be payments in excess of $2,000,000 annually as stated within the PR above and in the interview to initially have a short term starting up fee in the area of 75% of that amount which would equate to a $1,500,000 annually starting in the short term before building up to the $2,000,000 annually per becoming operational which would be virtually almost all Net Income:
http://ceolive.tv/cgra/
https://www.youtube.com/watch?v=XnC0uw2T-ns

Now consider some key variables from the BOTEC Analysis Reports that are highly respected and considered by the Washington State Liquor and Cannabis Board:
http://liq.wa.gov/marijuana/botec_reports

http://liq.wa.gov/publications/Marijuana/BOTEC%20reports/5a_Cannabis_Yields-Final.pdf
** The data is drawn from a review of the relevant literature and from research and interviews conducted with 16 growers.
** This report finds that indoor and outdoor yields average about 40 grams per square foot per harvest, but with a considerable range.
** Yields per square foot per year can be much higher of course, because there can be multiple harvests per year, particularly for indoor production.
** Indoor production allows 4-6 harvests per year (5 being typical), whereas outdoor production allows only 1-3 harvests per year.
** Thus, production per square foot per year is much higher with indoor growing.
** MJ industry experts estimate that the average price of a gram of medical cannabis is $12 to $15 per gram. We will again be conservative and use the $12 per gram figure for this exercise.
** It costs approximately $1 to $2 per gram indoors to produce good marijuana.


1 Acre = 43560 Square Feet
https://www.google.com/#q=1+acre+%3D+square+feet

The data above from the BOTEC Analysis Reports was done by…
(Very powerful credentials from the gentlemen below that all should read IMHO.)

Jonathan Caulkins, BOTEC Analysis, Carnegie Mellon University
http://botecanalysis.com/jonathan-p-caulkins/
http://www.heinz.cmu.edu/faculty/19cv.pdf

Matthew Cohen, TriQ, Inc.
http://www.triqsystems.com/company/matthew-cohen.html

Luigi Zamarra
http://botecanalysis.com/luigi-zamarra/
http://luigicpa.com/marijuana-industry-tax-specialist/

These three gentleman are all consultants engaged by the Washington State Liquor and Cannabis Board to help with developing policy and regulations for the state’s marijuana operations which is where the CGRA marijuana operations reside which is why you see the BOTEC Analysis Reports posted on the Washington State Liquor and Cannabis Board website below:
http://liq.wa.gov/marijuana/botec_reports

http://botecanalysis.com/


http://www.triqsystems.com/




Now that CGRA, through its wholly owned subsidiary, Chewelah Properties, has a Cannabis/Marijuana License to legally produce and/or process cannabis/marijuana and its byproducts within Stevens County in the state of Washington, I think it is fair to calculate what this ”potentially” means for CGRA in a few valuation scenario models.



CGRA Valuation Model from Wildfire Cannabis Acquisition

Within the PR below, CGRA, has the option to purchase Wildfire Cannabis, a Tier 3 cannabis Producer in Washington state that is approved to produce and/or process cannabis on 30,000 square feet of building space.
http://finance.yahoo.com/news/cgrowth-capital-inc-executes-commercial-133000700.html

Based on the variables and data from the BOTC Analysis Report above, consider below for a CGRA valuation if they were to acquire Wildfire Cannabis in some kind of a cash deal to where the share structure would remain constant.

30,000 Square Feet x 40 Grams Per Square Foot = 1,200,000 Grams
1,200,000 Grams x $12.00 Per Gram = $14,400,000 MJ Production “Gross” Revenues

** It costs approximately $1 to $2 per gram indoors to produce good marijuana.
** That’s roughly around $10 per gram for profit. So…

1,200,000 Grams x $10.00 Per Gram = $12,000,000 MJ Production “Net” Income

This means that Wildfire Cannabis has the potential to generate $14,400,000 in Gross Revenues and $12,000,000 in Net Income. Keep in mind, this is just from one harvest and according to the BOTEC Reports done by BOTEC Corporation and TriQ, there is a strong possibility of having 4 to 6 harvests per year for indoor growth. This means a strong possibility below per harvest for Gross Revenues and Net Income per harvest per year:

”Gross” Revenues Per Harvest
$14,400,000 in MJ Production x 1 Harvest Per Year = $14,400,000
$14,400,000 in MJ Production x 2 Harvests Per Year = $28,800,000
$14,400,000 in MJ Production x 3 Harvests Per Year = $43,200,000
$14,400,000 in MJ Production x 4 Harvests Per Year = $57,600,000
$14,400,000 in MJ Production x 5 Harvests Per Year = $72,000,000
$14,400,000 in MJ Production x 6 Harvests Per Year = $86,400,000

”Net” Income Per Harvest
$12,000,000 in MJ Production x 1 Harvest Per Year = $12,000,000
$12,000,000 in MJ Production x 2 Harvests Per Year = $24,000,000
$12,000,000 in MJ Production x 3 Harvests Per Year = $36,000,000
$12,000,000 in MJ Production x 4 Harvests Per Year = $48,000,000
$12,000,000 in MJ Production x 5 Harvests Per Year = $60,000,000
$12,000,000 in MJ Production x 6 Harvests Per Year = $72,000,000

According to the BOTEC Analysis Report… Indoor production allows 4-6 harvests per year (5 being typical), whereas outdoor production allows only 1-3 harvests per year. Thus, production per square foot per year is much higher with indoor growing.

With CGRA having its Outstanding Shares (OS) being in the amount of 391,597,994 Shares, below is a valuation based on 1 Harvest so that we can now derive a ”potential” valuation by deriving an Earnings Per Share (EPS) to multiply by a Price to Earnings (P/E) Ratio from the variables that we know to exist from the info above.

Net Income ÷ OS = EPS
EPS X P/E Ratio = Share Price Valuation
(** P/E Ratio for Marijuana Industry = 20.00 Presumably)

$12,000,000 ÷ 391,597,994 Shares (OS) = .0306 EPS
.0306 EPS x 20 P/E Ratio = .612 Per Share

So, this means that based on one harvest, CGRA if they do a deal to keep the OS constant and acquires Wildfire Cannabis which is their option to do so, would be worth somewhere in the area of .61+ per share per harvest for indoor marijuana cultivation. Again, this would be their value from just one harvest. Based upon the BOTEC Analysis Reports, indoor marijuana cultivation operations is expected to do anywhere from 4 to 6 harvests per year. This could potentially mean a valuation for CGRA from 1 to 6 harvests per year based on the above calculation of 1 Harvest equals a .612 Per Share Valuation for CGRA:

1 Harvest Per Year x $12,000,000 Net Income Per Harvest = .612 Per Share
2 Harvest Per Year x $12,000,000 Net Income Per Harvest = $1.22 Per Share
3 Harvest Per Year x $12,000,000 Net Income Per Harvest = $1.83 Per Share
4 Harvest Per Year x $12,000,000 Net Income Per Harvest = $2.44 Per Share
5 Harvest Per Year x $12,000,000 Net Income Per Harvest = $3.06Per Share
6 Harvest Per Year x $12,000,000 Net Income Per Harvest = $3.67 Per Share

I think some are not fully grasping the magnitude of what we have here in CGRA. The above valuation is just from one company coming into CGRA because of them now having their license.

To get an even better idea of the magnitude of a deal of this nature, use the Substitution Property to mix and match some numbers to see what a new CGRA valuation would be. For example; let’s say that CGRA gave Wildfire Cannabis a total of 10 Million shares or 20 million shares or … or 50 million shares to acquire them instead of using any cash. Although there would be an increase in the OS proportionately, you will see that the valuation for CGRA would still be huge. Even if they doubled their current OS (of which I truly do not expect), their valuation would still be huge. CGRA, through its wholly owned subsidiary Chewelah Properties, LLC has obtained their license to legally produce and/or process cannabis/marijuana and its byproducts within Stevens County in the state of Washington. This is absolutely huge. IMHO



CGRA Valuation Model from Leasing Agreements

To keep things simple, to get an idea of what to expect as a valuation from CRGA simply continuing to lease to Wildfire Cannabis and not carry out their option to acquire them, read the post below:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121444322



CGRA Valuation Model from Outdoor Capabilities

The first thing to keep in mind would be to understand that any outdoor operations would be in conjunction with or in addition to the indoor valuations that were discussed above.

If CGRA was to decide to get into outdoor marijuana cultivation, I’m guessing that it would be in some form of increments and not the entire 47 acres that was recently granted the license approval to grow cannabis/marijuana. So I will derive some valuation thoughts based on a 10 acre increment concept being allotted for outdoor marijuana cultivation.

This means that based on the BOTEC Analysis Reports:
http://liq.wa.gov/marijuana/botec_reports
http://liq.wa.gov/publications/Marijuana/BOTEC%20reports/5a_Cannabis_Yields-Final.pdf
** This report finds that indoor and outdoor yields average about 40 grams per square foot per harvest, but with a considerable range.
** Outdoor production allows only 1-3 harvests per year.
** MJ industry experts estimate that the average price of a gram of medical cannabis is $12 to $15 per gram. We will again be conservative and use the $12 per gram figure for this exercise.

1 Acre = 43560 Square Feet
https://www.google.com/#q=1+acre+%3D+square+feet

10 Acres Outdoor Marijuana Cultivation x 43,560 Square Foot Per Acre = 435,600 Square Feet
435,600 Square Feet x 40 Grams Per Square Foot = 17,424,000 Grams
17,424,000 Grams x $12.00 Per Gram = $209,088,000 MJ Production “Gross” Revenues

BOTEC speculated production cost of marijuana ranges from $2 to $3 per gram:
http://liq.wa.gov/publications/Marijuana/BOTEC%20reports/8a_Impact_of_tax_scheme_on_price_of_regulated_cannabis-Final.pdf

** That’s roughly around $9 per gram for profit for worst case.
($12 - $3 = $9)

17,424,000 Grams x $9.00 Per Gram = $156,816,000 MJ Production “Net” Income

Net Income ÷ OS = EPS
EPS X P/E Ratio = Share Price Valuation
(** P/E Ratio for Marijuana Industry = 20.00 Presumably)

$156,816,000 ÷ 391,597,994 Shares (OS) = .40 EPS
.40 EPS x 20 P/E Ratio = $8.00 Per Share

So, this means that based on one harvest from 10 acres of outdoor cultivation, the value for CGRA if they keep the OS constant, would be worth somewhere in the area of $8.00 per share per harvest. Again, this would be their value from just one harvest of ”maximizing” outdoor marijuana cultivation if the company decides to cultivate marijuana outdoors. Based upon the BOTEC Analysis Reports, an outdoor marijuana cultivation operations is expected to do anywhere from 1 to 3 harvests per year. This could potentially mean a valuation for CGRA from 1 to 3 harvests per year based on the above calculation of 1 Harvest equals a $8.00 Per Share Valuation for CGRA if they “maximize” outdoor marijuana cultivation as indicated below:

1 Harvest Per Year x $156,816,000 Net Income Per Harvest = $8.00 Per Share
2 Harvest Per Year x $156,816,000 Net Income Per Harvest = $16.00 Per Share
3 Harvest Per Year x $156,816,000 Net Income Per Harvest = $24.00 Per Share



** Again, keep in mind that the outdoor marijuana cultivation valuation would be in conjunction with or in addition to the indoor marijuana cultivation valuations that were discussed above.

** Also important to note, the indoor marijuana cultivation valuation was just based on one company, Wildfire Cannabis Company, LLC. The approved Marijuana License changes the use of CGRA’s Chewelah properties from being an old industrial site to one that allows for production of Cannabis for the entire 47 acres of which they have 90,000 square feet in buildings already existing for their indoor operations which can be seen in the post below:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121260161

** CGRA has three parcels of land and each parcel is allowed to have three Tier-3 Licensee's per parcel which equates to a total of nine Licensees. The valuation I posted above is based on one company having operations on one parcel. Confirmation that from the Washington state tax website proving that CGRA owns the land which consists of three tax parcels referenced from the Chewelah Properties:
http://propertysearch.trueautomation.com/PropertyAccess/Property.aspx?cid=0&year=2014&prop_id=47404

** All of the valuations above should be viewed as something to ”only” consider as more and more is confirmed to reflect that CGRA is having sustained growth to show continued progress within the marijuana Industry. Use the “Substitution Property” to replace any of the valuation variables with any number that you deem to be fair such as lower the Net Income, change P/E Ratio, etc. Still, I think you will see that regardless, CGRA is ”significantly” undervalued here at these levels.

** Now that CGRA, through its ”wholly owned subsidiary” Chewelah Properties, has been approved to cultivate marijuana for Stevens County within the state of Washington for their entire 47 acres and 90,000 share feet of buildings that CGRA owns, the sky is the limit. This was actually game changer news for CGRA.



Other Significant CGRA Research:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121290684
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121708696
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121434259
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121470903
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121446187
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121661844
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=121260161
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=119131737

v/r
Sterling