Sep 13, 2022
After analyzing the amount of recreational cannabis sales in Canada during this past May (the data is collected by Statistics Canada), we have become increasingly excited about the opportunity for cannabis brands in certain provinces in particular (British Columbia, Ontario, and Quebec).
During May, more than C$375 million of recreational cannabis was sold in Canada which represents a less than 1% increase when compared to that in April. According to Statistics Canada, British Columbia saw the largest percentage increase in total recreational cannabis sales when compared other Canadian provinces (on a month-over-month basis).
Statistics Canada reported that approx. C$55 million of recreational cannabis was sold in British Columbia in May, which is almost 4% higher than in the prior month. When compared to Ontario, which reported approx. C$150 million of recreational cannabis sales in May (0.5% higher than the prior month), British Columbia has a more attractive growth profile and we will monitor the trend on a going forward basis.
We recently started to conduct due diligence on cannabis brands in Canada and are working to determine which brands are positioned to capture significant market share in Canada. During the last year, Canadian cannabis companies have been under enormous pressure and we believe there are pockets of value after the decline.
The BC Bud Corporation (CSE: BCBC) (OTC: WFGCF) owns several Canadian cannabis brands and meets the criteria we look for in operators and want our readers to be aware of it. The company is led by a management team that is comprised of executives who have a proven track record in highly regulated industries, diverse expertise, and decades of experience in the United States (US) and in Canada.
The BC Bud Co. is Trading at a Considerable Discount to its Peers
Although The BC Bud Co. has reported several positive developments so far this year, the stock price has fallen by more than 55% from its high in January. When compared to high-profile Canadian cannabis retailers, the decline is much lower than its peers (as of September 8th) and we have highlighted two large-scale Canadian retailers below:
High Tide (Nasdaq: HITI) (TSX Venture: HITI) – down more than 75% from its 2022 high
Fire and Flower (OTC: FFLWF) (TSX: FAF) – down more than 60% from its 2022 high
On a comparative basis, we believe The BC Bud Co. has more upside potential than High Tide and Fire & Flower (based on the difference between market capitalizations). At current levels, The BC Bud Co. is trading at a considerable discount to High Tide and Fire & Flower and we want our readers to be aware of the disconnect in valuations.
High Tide and Fire & Flower are valued at approx. C$125 million and C$105 million, respectively (based on market capitalization). The BC Bud Co. is valued at less than C$4 million (based on market capitalization) and we find the disparity between the valuation of The BC Bud Co., High Tide and Fire & Flower, to be compelling.
One of the primary reasons for our bullish outlook on The BC Bud Co. is related to the amount of stock that is owned by company executives. Based on our conversation with the company, approx. 67% of The BC Bud Co. is owned by its executives. We consider this statistic to be significant when analyzing the business and want our readers to be aware of this.
An Execution and Growth Story in the Making
We believe The BC Bud Co. is well positioned to benefit from the growth of British Columbia’s recreational cannabis industry. The management team is executing on a multi-faceted growth strategy that is centered around capturing market share in the province and we are of the opinion that the market has not taken this into account when valuing the business.
Going forward, The BC Bud Co. plans to capture additional market share in British Columbia by focusing on the following:
Brand Awareness – The company is focused on two core goals: building trust and delivering top-notch consumer value
Product Development – The BC Bud Co. has a large product portfolio and has formed strategic relationships to enhance its offerings. Some of the products that are sold to consumers are solventless extracts, gourmet edibles, and infused beverages.
Partnerships and Licensing –Part of The BC Bud Co’s growth strategy is the formation of strategic partners and craft cultivators. The company’s licensing model allows the company to focus on providing premium products and the best customer experience.
Value and Customer Care – The BC Bud Co. is committed to providing the best consumer experience and we consider customer retention to be a key factor in the growth trajectory
A Company with Catalysts for Growth
While large-scale Canadian cannabis retailers like High Tide and Fire & Flower are facing significant headwinds from expanding too fast, The BC Bud Co’s management team has been executing on a calculated growth strategy. We believe the company’s patient approach to growth could create acquisition opportunities for The BC Bud Co. and expect the brand to take market share from retailers like High Tide and Fire & Flower.
The BC Bud Co’s patient growth strategy has played an important role in the formation of value-added strategic partnerships. We believe the company has substantial growth prospects and are of the opinion that the market is not assigning much value to this. We think the disconnect with the market has created an opportunity for our readers to learn about a growth story that is flying under the radar and will monitor how the story advances from here.
By executing on a series of organic and inorganic growth initiatives, The BC Bud Co. has improved its growth prospects and we consider this to be a core pillar of the opportunity. We are of the opinion that the management team has its finger on the pulse of the market and understands how to satisfy consumers.
During the last few years, the amount of unsold cannabis being destroyed by Canadian Licensed Producers (LPs) has significantly increased. Some analysts have attributed the trend to a lack of quality product on the market and we believe The BC Bud Co’s focus on selling premium products has protected the business from the cannabis destruction trend in Canada.
We believe The BC Bud Co. possesses the traits needed to be successful in Canada’s cannabis industry and are bullish on the direction the management team is bringing the business. At current levels, we believe the Canadian cannabis brand has a compelling valuation and a favorable risk-reward profile.
https://technical420.com/cannabis-article/the-bc-bud-co-is-a-cannabis-brand-story-to-be-aware-of/#
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