Investors Should Be Looking To Israeli/European Cannabis Stocks To Diversify Amidst The Canadian Sector Weakness
During the last year, the market has become much more excited about the international cannabis opportunity as emerging markets continue to gain serious traction. We have been bullish on the international cannabis opportunity and have been highly focused on the Israeli market.
Israel represents an exciting cannabis market and we are not surprised by the recent increase in the number of companies that are focused on this burgeoning opportunity. One of the reasons we are bullish on the Israeli cannabis market is due to the attractive economics associated with cultivating cannabis. In Canada, it costs approx. $1.50 to $2.50 to produce each gram of cannabis. In Israel, it costs less considerably less to produce each gram of cannabis and this provides cultivators with a major competitive advantage. Israel has the ideal climate for cultivating cannabis and the costs associated with constructing a cultivation facility are much lower which makes it easier for businesses to expand.
Going forward, we expect to see Israeli cannabis producers become major exporters to the European Union (EU) and are bullish on the growth prospects associated with this market. When compared to North America, the cost of cannabis at the consumer level is much higher and this provides Israeli cannabis producers with another important advantage.
During the last year, we have been laser focused on the Israeli cannabis market and have been working to identify companies that are positioned to capitalize on this burgeoning opportunity. Isracann is a company that we have been excited about and have been closely watching. Next month, the Israeli cannabis company is expected to commence trading on the Canadian Stock Exchange (CSE) and this is an opportunity to put on your radar.
Isracann: An Israeli Cannabis Listing to be Watching
Isracann has visible growth prospects and has fully funded the buildout of 232,900 sq. ft. of cultivation facilities that can produce approx. 23,500 kilograms of premium cannabis on an annual basis. One of the most important aspects of Isracann pertains to its facility and how it will allow them to capitalize on the international cannabis market. The company’s facility is planned to be an IMC-GAP/GSP certified facility will be constrcuted to meet all regulatory standards and we find this to be significant.
Management expects these facilities to have an initial production capacity of 11,500 kilograms per year. In the long-term, the management team plans to double production capacity to 23,500 kilograms per year. We believe that the hybrid greenhouse model has several advantages over indoor purpose-built facilities (i.e. precise environmental controls and containment) and we are favorable on this aspect of the story.
In 2020, Isracann expects to complete its first harvest and plans to ramp up production capacity from there. The proposed state-of-the-art facility is located on a property that offers significant room to expand and we are favorable on the growth prospects associated with this. In 2020 and beyond, we expect to see increasing demand for Israeli cannabis products and the focus on increasing production capacity is important for the company’s growth potential
A Growth Opportunity to be Excited About
Although the domestic cannabis opportunity is significant, Isracann’s long-term goal is to become a leading supplier to European markets and we believe that this is the right approach. We are favorable on this strategy as the EU’s population is almost twice the size than all of North America. When looking at the export opportunity into the EU, we believe that Isracann is better positioned when compared to the opportunity in Canada. The difference in the amount of time it takes to transport from Israel to the EU will play an important role in profitability as it shortens the amount of time to get product to market.
Israel was a first mover on the medical cannabis industry and started learning about its medical benefits more than 50 years ago. The country has immense knowledge especially as it relates to specific cannabinoids and this will play an important role when big pharma gets involved with the sector. Isracann has done a great job positioning itself to capitalize on an emerging opportunity that is not yet saturated.
Israel has an attractive climate for cannabis cultivation and Isracann has a management team that has diverse skill sets as well as a proven track record of success in a variety of sectors. We find this to be an important aspect of the story and are impressed with the way the team has been able to advance the opportunity. During the last year, the company has made significant additions to the team and we are favorable on the way the story continues to advance.
