Here are my thoughts on the valuation ratio between CW and CV. Forgive me for any repetition of past thoughts or data. Just want to be thorough with what numbers are available:
Last year, CWBHF pulled in approximately $69,500,000 off of 63,000 pounds of CBD rich hemp, or approximately $1100 per pound. This year they started with a raw material inventory of 675,000 pounds of CBD rich hemp harvested from 300 acres in 2018, or 2250 pounds per acre.
We know they wont sell all 675,000 pounds as processed inventory this year(they said it covers all of 2019 and part of 2020 demand, expecting $120-$170mil in sales in 2019), but if we just use the previous metric as a valuation standard, ($1100 per pound) x (675,000 pounds)=$742,500,000? worth of inventory.
CW's upcoming 2019 harvest will be based on 862 acres instead of 300. So, (675,000 pounds)/(300 acres)=2250 pounds per acre.
(2250 pounds per acre) x (862 acres)=1,939,500 pounds of CBD rich hemp. (1,939,500 pounds) x ($1100 per pound)=$2,133,450,000
This is less than 90 days away.
If CWBHF can plant 1250 acres next Spring 2020, the same 2018 metrics would project them harvesting 2,812,500 pounds(1250x2250) in Q3 2020. Using 2018's $1100 per pound, CWBHF would have inventory with the potential to cover $3,093,750,000 worth of demand. That's just a little more than one year from now, and that's not even counting what they will still have left in inventory at that point from this upcoming 2019 harvest.
We can consider less annual revenue per pound, less pounds per acre, biological asset adjustments, increased COGS or other expenses, margins of error, mistakes, hang-ups, hold-ups, or whatever, but even on the lowest of low ends, the dollar value of just CWBHF's processed 2018 harvest inventory by itself, eclipses the value of CVSI's entire operation.
CWBHF will be dedicating many more acres to their own seed production this year, and so I expect the pounds per acre to be less than 2250 for next harvest, but who knows? If you do look at other farms, that is a relatively high yield per acre.
The $1100 in annual revenue per pound calculation is also going to drop as a purely mathematical effect, because their annual harvests will now provide enough supply going forward to cover the current pace of demand for more than one year. 2018 was a good year to work off of though because they pretty much ran through their entire 2017 harvest of 63,000 pounds during 2018.
Besides the number of acres, cut any of the other variables in half just for fun, and they still result in absolutely huge inventory valuations compared to CW's current market cap of approximately $2billion.
Extraction is generally considered to be the value adding step in this industry, but consider instead the value gained from producing tons of your own CBD rich hemp seeds to plant for each future harvest. CVSI pays suppliers for the wrong hemp(I know it's cheap), while CWBHF supplies themselves with the right hemp for damn near free. The fertilized plants don't ask for much in exchange, and one correctly bred and cultivated plant can provide hundreds of feminized CBD rich hemp seeds.
During the time since the Farm Bill's passage, what has CVSI done to compare to the magnitude of CWBHF's inventory growth? Contract some new U.S. farmers who may or may not have CBD rich hemp and will dictate their prices to CVSI? Buy or lease a new facility to continue processing fiber hemp?
If both CWBHF and CVSI just stay on their current operational trajectories, the ratio of CW's value to CV's value is going to continue to increase from here, not shrink, or stay the same. The value gap will grow immensely over the next 18 months unless CVSI is going to do something drastic to catch up to the colossal per-harvest-value-growth from CWBHF. I'm not saying CVSI should go down in value from here, but I am saying CWBHF's value should definitely go up. All IMO of course.
AI
