Boom
Apr 13, 2022
The cannabis sector recently benefited from the advancement of pro-cannabis legislation in the United States (US) and we believe the tide is starting to turn for the industry.
The last few months have been challenging for the cannabis sector and valuations have plummeted when compared to the first quarter of 2021.
Although the cannabis industry is starting to turn into a global opportunity, momentum has been slow. From the US to the European Union (EU), we believe the global cannabis industry recorded major advancements in 2021 and continue to have a bullish outlook on the long-term opportunity.
Germany is a market that we have been bullish on and believe the recent change in the government is a major positive for the cannabis industry. We consider Germany to be the most attractive cannabis market in the EU and are favorable on how 60% of patients in the country are covered by insurance. When it comes to the EU cannabis industry, we expect other countries to follow Germany and expect this to be a catalyst for the global market.
Franchise Global Health: A Leading EU Cannabis Firm Starts Trading
In late March, Franchise Global Health commenced trading on the TSX under the symbol FGH. The leading EU cannabis company is led by a management team that has a proven track record when it comes to capitalizing on some of the most attractive international markets. With an extensive infrastructure in Germany as well as in 18 other countries in the EU, we consider Franchise to be a multi-national rapid growth story.
When analyzing the markets that Franchise has leverage to, we are most excited about the cannabis opportunity in Germany. We believe the market is in the early innings of a major growth cycle and are bullish on the management team’s strategy to advance the business.
Franchise’s management team has been ahead of the curve when it comes to the cannabis opportunity in the EU. In 2017, the leading European cannabis company was granted the first license in Germany and sold the first gram of medical cannabis in the country.
When compared to leading Canadian Licensed Producers (LPs), Franchise Global is trading at a much lower multiple and find the risk-reward profile to be favorable at the current valuation. As the management team continues to execute on the EU, we expect to see increased interest in the opportunity and want our readers to be ahead of the curve with this opportunity.
Selling to More than 1,200 Pharmacies In Germany
Currently, Franchise is selling medical cannabis to more than 1,200 pharmacies in Germany.
Last year, Franchise acquired access to a 50,000 sq. ft. state-of-the-art production facility in Ontario that meets EU GMP standards and we consider the acquisition to be an inflection point for the business. With the facility, the company has evolved into a fully integrated cannabis company which has a platform that is extremely scalable.
Has a Strong Balance Sheet and Catalysts for Growth
Since inception, Franchise has raised more than $56 million of capital and we are impressed by its ability to raise money in a challenging market. From having a world class genetics library to having access to an EU GMP certified facility, Franchise is positioned to increase the amount of premium cannabis it is selling in the country.
From a leadership standpoint, the management team is comprised of executives with a proven track record in highly regulated markets. A few members of the leadership team have been a part of some of the largest acquisitions in the cannabis industry and we consider this type of experience to be invaluable.
We classify Franchise as a business that has significant potential catalysts for growth. Going forward, the company plans to continue to capitalize on the medical market in Germany and we expect the future legalization of recreational cannabis in the country to be the most significant long-term growth driver for the business.
Another reason for our favorable view of the company is related to its leverage to the cannabis market in Israel. We consider Germany and Israel to be the two most attractive international markets and believe this is an important part of the Franchise story. Due to Franchise’ leverage to these markets, we expect interest in the business to rapidly increase as the story continues to advance and want our readers to be aware of this.
When you combine a growth company like Franchise with a sector that is trading at low valuations, we believe you have a recipe for success. Franchise possesses the traits that are needed to successfully capitalize on the global cannabis industry and we believe our readers need to be aware of the opportunity.
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