Indiva Limited (NDVAF)

[JohnCM]

Indiva: Small Cannabis Player In Ontario

May 23, 2018 12:20 PM ET
About: Indiva Ltd. (RMKXF)
Cornerstone Investments

Summary

INDIVA is a late-stage applicant in the Canadian cannabis market.

Current facility expects to produce up to 3,000 kg per year with land available for expansion bringing capacity to 40,000 kg annually.

Completed the RTO in December 2017, and share price has been under pressure due to the sector-wide malaise.

We reiterate our preference for large-cap names for investment purposes due to better risk and reward; however, we recognize the value in introducing smaller companies to our readers.

Overview

Continuing our series on small- to mid-cap cannabis companies, we are bringing to you another up-and-coming licensed producer INDIVA (RMKXD).

INDIVA started trading on the TSX Venture Exchange on December 19, 2017, making its short history as a public company dominated by the industry-wide selloff as share price continued to slide throughout 2018.

However, we think INDIVA has a solid business strategy and is relatively inexpensive compared to the larger players. As a micro-cap company, there is liquidity concern and investors should be aware of the risks inherent in investing in tiny public companies.

We have long held the view that the market will become oversupplied eventually, thus, we expect INDIVA to pursue a wholesale strategy given its smaller size and lack of cost advantage, which is not necessarily a bad outcome.

We are Neutral on the stock due to better risk/reward elsewhere in the market.