A more-reasonable valuation boosts takeover appeal and shareholder value

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Marijuana Producer

A network of medical cannabis clinics and an exclusive telemedicine app are part of the expansion plans of this Ontario marijuana producer focused on premium brands and unique markets.


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VIVO CANNABIS, $0.83, symbol VIVO on the Toronto Venture Exchange (Shares outstanding: 294.8 million; Market cap: $212.7 million; TSI Cannabis Quality Rating (CQR): www.vivocannabis.com), is based in Napanee, Ontario. It operates indoor cannabis cultivation greenhouses.

In August 2018, the company changed its name from ABcann Global Corporation to VIVO Cannabis. It believes that the new name more accurately reflects its evolution, purpose and direction. The stock symbol changed to “VIVO” from “ABCN.”

In addition to its greenhouses, the company operates Harvest Medicine, a network of medical cannabis clinics. It also has an exclusive, free telemedicine app.

VIVO offers what it sees as premium brands of cannabis, targeting unique customer segments. Those marijuana strains include Beacon Medical, Fireside, Canna Farms and Lumina.

In August 2018, VIVO acquired Canna Farms, a marijuana producer based in Hope, B.C.  The price was $133.0 million, of which $22.5 million was in cash and $92.5 million in shares. Canna Farms was B.C.’s first licensed producer of medical marijuana, and has several years of cultivation experience and a significant patient base.

VIVO now aims to undertake a significant expansion of its production capacity. It will also continue to pursue partnership and product development opportunities in Canada as well as internationally in select markets, including Germany and Australia.

Canna Farms has received approval from Health Canada to double the size of its Yale Road facility in Hope, B.C. The expansion will include production and product development space, along with automated packaging equipment. Canna Farms also recently launched an online medical cannabis website.

VIVO is building a new production site in Napanee. The Kimmett facility will offer as much as 150,000 square feet of growing space.

In the three months ended December 31, 2018, the company’s overall revenue soared to $5.8 million from $300,000 a year earlier. The jump came from the acquisition of Canna Farms on August 31, 2018. VIVO lost $8.0 million, or $0.03 a share, compared to a loss of $11.1 million, or $0.08 (on fewer shares outstanding).

The company had a high cash balance of $74.8 million on December 31, 2018. Its long-term debt was $28.3 million.

The gap between VIVO’s market cap and its potential sales isn’t as big as it is for many of its competitors. That could also make the company a possible takeover candidate. While that alone is not reason enough to buy the stock, it adds to VIVO’s appeal.

VIVO Cannabis has a 3-Leaf Cannabis Quality Rating (CQR). The stock is a speculative buy, but only for aggressive investors who want exposure to the marijuana industry.

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