Consumer
Namaste Technologies Inc. (TSXV: N) (FRANKFURT: M5BQ) (OTCMKTS: NXTTF) is a Canadian cannabis and newly minted wellness company that we have been following for several years and believe that the market does not completely understand the amount of value that can be generated between its business units.
Namaste Thesis:
During the last year, Namaste reported a series of significant developments and we are bullish on how the business has advanced under a new management team. We believe the leadership team is just starting to see positive results from its business shift and consider it to be an under-appreciated opportunity for the following reasons:
Namaste has reported several important milestones and we are bullish on the near and long-term growth prospects that are associated with its platform
The company has recorded significant advancements through the formation of strategic partnerships and from making accretive acquisitions
Through its business units, Namaste is levered to several attractive aspects of the cannabis value chain and we believe the market undervalues this
Almost two years ago, Namaste brought in a new management team and we are bullish on the direction that the business is heading
At current levels, we believe that Namaste has a favorable risk-reward profile and a compelling valuation
About Namaste:
Namaste is a marketplace platform for cannabis and wellness products and represents a differentiated play in the sector. The company operates an innovated multifaceted e-commerce platform using artificial intelligence to drive sales which is comprised of the following divisions:
CannMart – Canada’s first licensed producer that is distinctly not a grower instead focused on creating the foundations of an ultimate cannabis marketplace at cannmart.com, capable of increasing average order basket with its innovative built in AI that also enhances the cannabis experience for all consumers. CannMart.com presently offers medical cannabis within Canada and facilitates recreational sales in the province of Saskatchewan. In addition, CannMart Inc. acts as distributor for a network of smaller licensed producers to provincial government buying bodies and runs a processing and storage facility in Ontario.
CannMart Labs recently received its processing licence from Health Canada and is established for Butane Hash Oil (BHO) extraction using leading extraction technology, making it one of only a few facilities in Canada with such capabilities. The Company is set to produce higher margin in-house branded Cannabis 2.0 products for consumers at CannMart.com and recreational customers across Canada through CannMart’s provincial distribution channels.
Namaste MD Application – The telemedicine side of Namaste’s business that serves as its medical cannabis platform where patients can consult with a healthcare provider on what products they should consider.
Continues to Add Leading Cannabis Brands to CannMart’s Artificial Intelligence Marketplace Platform
In the last few weeks, Namaste reported major developments as regards cannabis distribution announcing the addition of leading licensed producers Auxly Cannabis Group (XLY.V) (CBWTF), HEXO (TSX: HEXO; NYSE: HEXO) and (The Green Organic Dutchman Holdings (TGOD.TO) (TGOD) to the CannMart.com platform.
Concurrent with the announcement, Namaste announced that it has been focused on selecting strategic craft cannabis producers that add new and exciting products to its platform. Two of the most recent additions were SugurBud and Wabi Sabi Brands and Namaste expects products from these producers to become available in the coming weeks.
We are favorable to the increase in the number of licensed producers and accessory suppliers as well as the quality of the brands that are contacting Namaste to have their products featured on CannMart.com. The website offers these companies a first mover advantage in a leading edge cannabis e-commerce platform and we will monitor how this aspect of the story supports the growth of the business.
The COVID pandemic has significantly changed the landscape of the Canadian cannabis industry and we believe that Namaste is well positioned to benefit from the shift. Licensed Producers are searching for opportunities to streamline their distribution channels and we believe that Namaste satisfies this need through CannMart.com.
Going forward, Namaste plans to continue to leverage its marketplace platform, VendorLink, as companies are starting to recognize the value that is added through the company’s innovative technology platform and is a trend that we expect to become more significant over the next year.
CannMart Labs Represents a Core Pillar of the Namaste Opportunity
Last month, Namaste reported a major milestone and announced that CannMart Labs was granted a standard processing license from Health Canada. This represents a major development and following the announcement, the company is focused on commissioning its state-of-the-art equipment.
Going forward, Namaste plans to leverage its existing sales license through CannMart Inc. to bring branded recreational products to provinces in Canada where Namaste already has an established distribution network in place. The management team expects to have CannMart Labs manufactured products available for sale by the end of the second quarter of 2021.
Namaste owns 100% of the CannMart Labs facility, a purpose-built oil extraction facility which utilizes state-of-the-art extraction technology and is designed with European Union Good Manufacturing Practice (EU-GMP) certification requirements in mind. The facility provides Namaste with several avenues to generate revenue and the management team plans to sell its manufactured products to other licensed producers and through other sales channels (as they become available).
One of the features that sets CannMart Labs’ facility apart is that it is related to how it was designed to facilitate BHO extraction methodologies while using best-in-class extraction technology. The BHO aspect of the story makes Namaste one of only a few companies in Canada to have a facility with such capabilities and we believe our readers should be aware of this aspect of the story.
Going forward, CannMart Labs plans to produce higher margin in-house branded cannabis 2.0 products to sell to medical customers at CannMart.com and to recreational customers across Canada through CannMart’s network of provincial sales partners. Initially, the 2.0 products that will be sold by Namaste include shatter, live resin, badder, wax and with capabilities to expand future distillate product offerings to include vape cartridges, gel capsules, tinctures and edibles. We are bullish on the growth prospects that are associated with this aspect of the market and will monitor how CannMart supports the growth of the entire business.
Nutraceuticals
A core pillar of the planned expansion is related to the approval of the launch of a nutraceutical division in fiscal year 2021 headed by Namaste Chief Operating Officer Faraaz Jamal. Previously he was responsible for the strategic reorientation of Bulletproof 360 Inc., a health and wellness business where he was able to quickly scale the brand across multiple channels and product categories to generate successful revenues.
The nutraceutical product market is composed of products that are poorly formulated with ingredients that are poorly absorbed by the body. Under Jamal, Namaste plans to launch a new differentiated offering that brings an exciting formulation, combined with an effective, affordable drug delivery technology that substantially increases bioavailability of products being developed.
Psychedelics and Other Paths to Wellness
The advancement of the psychedelic therapy market has also caught Namaste’s attention and we will monitor how it is able to capitalize on the emerging vertical. We understand CannMart Labs plans to engage a regulatory consulting firm to advise on the company’s potential application to Health Canada for a Controlled Drugs and Substances Dealer’s License.
The license would allow Namaste to engage in a variety of activities that are related to controlled substances that include the research and manufacturing of controlled substances such as psilocybin, psilocin and MDMA, and the sale of controlled substances to researchers and companies undertaking clinical trials.
By no means does Namaste plan to take its finger off the pulse of the cannabis industry and we find this to be an important aspect of the story. In 2021, the company plans to expand its distribution of premium cannabis products through CannMart. To accomplish this, the company will leverage the relationships it has with cultivators and bring innovative products to market through its BHO extraction facility.
Planning a Multi-Faceted Expansion in the USA
With one eye open on the developing federal legislation story in the US, we were interested to see Namaste announce in early February that it had received approval from the TSX Venture Exchange to proceed with selling smoking accessories and hemp-derived cannabidiol (CBD) in the US.
The move into the US is the perfect example of Namaste’s goal of increasing the size of its total addressable market as well as its plan of exploring the entrance into additional opportunities in the US as regulation evolves.
Namaste has gone live in the USA for American customers of smoking accessories and hemp derived CBD at www.cannmart.com and we will monitor how the platform generates traction with US consumers. To make the launch as successful as possible, the company plans to leverage its VendorLink technology in collaboration with DankStop and PeakBirch Logic, Inc.
Namaste plans to take advantage of new opportunities in the US that may evolve as a result of changes in regulations at the federal level. The planned expansion falls perfectly in-line with the company’s evolution into a wellness company that connects consumers to their wellness needs.
The company will apply its VendorLink platform to new US wellness markets, including new nutraceutical products, by the end of fiscal 2021. We believe the market does not fully appreciate the potential growth prospects that are associated with this strategy and will monitor how the story evolves from here.
One of the more significant developments for Namaste in 2021 is related to the plan to broaden its total addressable market and to evolve into a pre-eminent wellness company. Through this strategy, the company plans to connect consumers to their wellness needs through non-cannabis pathways.
Namaste’s mission is to leverage technology to build the world’s first personalized wellness marketplace where consumers can learn about wellness products, interact with a variety of brands, and make informed purchases.
A Management Team that is Focused on Execution
A few years ago, Namaste reported substantial changes to the management team and we are favorable on how the story has advanced under the new leadership team. We believe the transition was more seamless than expected due to the appointment of Meni Morim as Chief Executive Officer (CEO) and are favorable on how he has executed on key growth initiatives.
Prior to taking over as CEO, Mr. Morim joined Namaste as Chief Product Officer and we are impressed with how he has been able to impact the growth of the business. During the last year, Mr. Morim has executed on several important initiatives and we are bullish on the growth prospects that are associated with the platform.
Due to the shift in strategy, we expect Namaste to continue to grow significantly each year their cannabis revenue and believe that the market under appreciates this aspect of the story. By forming strategic relationships with leading Canadian licensed producers, Namaste is creating a track record of execution and we attribute this to the management team.
Over the next year, we believe that the management team’s ability to continue to execute will be the most important value driver for the entire business and are of the opinion that the market is discounting the growth potential that is associated with the business.
An Attractively Valued Growth Story
At current levels, Namaste appears to be trading at a discount to its peers and is trading at 2x current assets. We find the valuation to be compelling and are favorable on the risk-reward profile that is associated with the platform. We believe the planned expansion into the USA market represents a major potential catalyst for growth and are bullish on this aspect of the story.
Although it is challenging to value a cannabis company like a food, technology or clothing business, the liquidity metrics (current ratio and cash flow) that are commonly used for these types of businesses can be applied to Namaste. When analyzing Namaste with these metrics, we determined that it looks like an undervalued opportunity and find the risk-reward profile to be attractive. Namaste is led by a management team that has a strong financial position to execute with no debt which we believe is an important aspect of the story.
During the last month, Namaste has been performing well and has come substantially off its recent lows. Momentum has been trending to the upside and we believe that this is a story that is just getting started. Namaste has visible growth prospects and this is an opportunity that should be on your radar.
Comentários