A high profile brand in the hemp-infused food and beverage arena, Rocky Mountain High Brands, Inc. (OTC – RMHB – Speculative Buy), is poised to serve as the category leader. With production runs for hemp-infused beverages totaling nearly 4 million cans since February 2015, it is no surprise that RMHB has the capability and consumer following to reach this objective in relatively short order.
RMHB is the very definition of a pioneer. In July of 2014, the Company leadership team took a revolutionary idea – a healthful, hemp-infused energy drink – from concept to first production run in just 7 short months. This better and healthful alternative to the usual energy drink options infused with hemp, and such natural ingredients as ginseng, guarana, and beet sugar, and proved to be a great success. RMHB is in an enviable position. The Company boasts a leadership team similar to a midcap rather than a microcap. The Company brought on board Gerry David, former CEO of the wildly successful beverage company Celsius Holdings (NASDAQ – CELH), Kevin Harrington, the “king” of consumer products marketing and infomercials, and John Blackington, a former Coca-Cola executive. These additions to the current RMHB leadership team add firepower and laser-sharp focus to new, immature markets that offer huge promise.
Leveraging trends in personalized nutrition and the many positive health benefits cannabidiol (CBD) offers, the Company is poised to enter the fast-growing hemp-derived CBD market in March 2018 with its HEMPd suite of products including water, tinctures, gummies, topicals and others. A recent report released by the World Health Organization (WHO) suggests that CBD has therapeutic benefits for those suffering from epilepsy, Parkinson’s, cancer, pain, anxiety, and other ailments. According to Hemp Business Journal, the overall CBD market is forecast to grow from $262 million in 2016 to $1.15 billion in 2020 and given that the market is incredibly fragmented, RMHB is well positioned to capture a significant market share very quickly.
Separately, the Company just recently signed the most important contract in RMHB history. This private label deal agreement for hemp-based, CBD-infused beverages with CBD ALIMENTOS SA DE CV, a partner food and beverage distributor from Mexico, has the potential to earn over $7 million dollars in revenue for calendar year in 2018 alone. It should be noted that this contract represents one of the single largest orders of its kind in the space and RMHB serves as one of the first companies to infuse a functional beverage with CBD in a can, affirming its trailblazer status. Moreover, this opportunity could lead to greater financial visibility and flexibility along with more private label contracts.
In our view, RMHB’s stock reflects legacy “baggage” and does not reflect the impact of the new private label deal, and the strength of the new leadership team. Most importantly, it is clear that these shares trade at a significant discount to their hemp/CBD peers. As demonstrated in our peer analysis in the report’s Valuation and Conclusion section, the average market cap for the publicly traded companies in this highly fragmented space where meaningful revenue is on the come, is $94 million. The current valuation for RMHB’s shares clearly represents little value for its pending entrance into this space and its strong reputation as a brand and pioneer. Moreover, the revenue from the private label deal, in our view, already cements RMHB in the top tier of players in terms of market share for next year. Thus, we believe that RMHB will trade at a premium to the average 2018 when investors realize the potential of this Company.
New Industry News Out Over Hemp! Congress is about to legalize cannabis. Just not the kind that gets you high
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"The legalization provision, championed by Senate Majority Leader Mitch McConnell (R-Ky.) and included in the Senate’s farm bill, would officially classify hemp as an agricultural commodity and remove it from the federal controlled substances list. Lawmakers are also expected to advance the measure when they meet next month to draft the final, bicameral version of the legislation."
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