3 Canadian CBD leaders investors need to know

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Demand for products that contain cannabidiol (CBD) continues to increase and this is a trend that is expected to continue for years to come.

Although the CBD market is a multi-billion-dollar opportunity, we believe that this market is flying under the radar. When compared to companies focused on the production of cannabis that contains THC, companies focused on CBD tend to trade at a much lower valuation and we think this creates a unique opportunity for investors.

During the last year, we have been focused on identifying leading players in the CBD market and have highlighted three stocks to watch this morning.

Phivida: A Burgeoning Opportunity

Last month, we provided an update on Phivida Holdings (VIDA.CN) (PHVAF), which is focused on capitalizing on the global cannabis industry. The company is an emerging leader in the burgeoning medical CBD and hemp oil extract market and offers a premium line of CBD products which are marketed as functional foods and nutraceutical supplements.

Phivida has been trending higher after signing of a definitive agreement for its joint venture with WeedMD Inc. (WMD.V) (WDDMF). The Cannabis Beverages Inc. joint venture was first announced in the spring of 2018 and is focused on manufacturing, marketing and distributing cannabinoid-infused beverages for the medical and future adult-use cannabis markets.

We are favorable on this relationship and think this could prove to be a major value driver for the company. The joint venture will operate one of the first cannabis-infused beverage production facilities in Canada and we are monitoring how the team is able to execute on this.

WeedMD will be the exclusive cannabis supplier and distributor for CanBev cannabis-infused beverages and will designate production space at its 610,000 sq. ft. facility that will provide CanBev with extensive production infrastructure as well as adequate space to expand for future growth. Phivida will be sublicensing its current and future trademarks, intellectual property, branding and packaging to CanBev. Phivida has also agreed to lead new product innovation, research and development, formulation, packaging and branding for CanBev.

During the last month, Phivida has been trending higher and the shares have rallied more than 40%. The market has responded favorably to the announcement with WeedMD and momentum has been trending higher. Phivida is led by a management team with a proven track record of success and investors should be keeping an eye on this one.

LiveWell: A Leading Global CBD Producer

One company that has been ahead of the curve in the CBD market is LiveWell Canada (LVWL.V). The company has been studying this market for quite some time and has an internal research department dedicated to staying at the leading edge of this trend. LiveWell has a very strategic partner in Canopy Growth (WEED.TO) (CGC) and Canopy Rivers, which provides a significant advantage over the competition.

The relationship with Canopy Growth and Canopy Rivers leaves us very confident with LiveWell’s ability to deliver. The companies will work with LiveWell to accelerate the development and commercialization of Livewell's large scale cannabis projects in Ottawa, ON and Pontiac, QC, which collectively represent over 1,500,000 sq. ft. of cannabis production and processing infrastructure.

LiveWell is developing a new approach to health and wellbeing through advanced cannabinoid research used in designing medical and consumer health products. The company is focused on the global opportunity and has already entered the Brazilian market. Last week, LiveWell announced a major supply agreement for 5,000 kilograms of CBD isolate at $7,000 per kilogram.

We think that LiveWell will find no shortage of companies looking for premium CBD isolate. This is the first supply agreement for the company and expect to see more announcements in the coming months. LiveWell has been focused on increasing the amount of CBD available for sale and has been executing on this.

Last month, LiveWell announced a major milestone and secured 1,000 acres of Canadian industrial hemp biomass for the purpose of extracting and producing cannabinoid (including CBD) products for distribution in Canada. Using current extraction technology licensed to LiveWell, the company anticipates extracting approximately 25,000 kg of CBD for sale under the ACMPR. LiveWell also has an option to buy an additional 1,000 acres of Canadian industrial hemp biomass and we are favorable on this growth opportunity.

TGOD Announces a Major European Acquisition

Earlier this year, The Green Organic Dutchman (TGOD.TO) (TGODF) commenced trading on the TSX exchange and we have been closely monitoring this one. The global cannabis market represents a massive opportunity and TGOD has been laser focused on this. The organic cannabis producer is focused on the THC and CBD opportunity and has advanced its fundamental story by making a major acquisition.

Last month, TGOD announced the acquisition of HemPoland, a leading European manufacturer and marketer of premium organic CBD oils and was the first company in Poland to obtain a state license allowing the company to grow hemp and manufacture CBD oil products. This deal is massive and will provide an easy way for TGOD to expand into new markets in Europe. This deal is immediately accretive and we will monitor how the team executes on this.

HemPoland has attractive leverage to several emerging markets in Europe and we are favorable on the geographic diversity. This strategic acquisition provides access to HemPoland’s vast distribution network, premium Cannabigold brand, state-of-the-art hemp oil extraction technologies, and provides a strategic pathway into the European market for TGOD’s medical & recreational products and licensing deals.

HemPoland provides TGOD with a European gateway with distribution channels to over 750 million people and sales in over 700 locations across 13 countries. The company is vertically integrated, with over 1,250 acres of cultivation leveraging third parties, multiple commercial scale extraction units, and local distributors in Poland, Austria, Netherlands, Germany, United Kingdom, Italy, Switzerland, Portugal, Ireland, Czech Republic, Slovenia, Lithuania, and Estonia. This is a massive acquisition that significantly enhances TGOD’s presence in Europe and provides an easy route for expansion.

HemPoland is a key piece to a number of strategic acquisitions and planned partnerships focused on expanding TGOD’s global distribution network. Gaining market share with CBD products in the EU allows TGOD to establish immediate brand awareness across all verticals including infused beverages.

Although this acquisition is significant, the terms of deal were very reasonable. In a world of billion-dollar investments and acquisitions, it is nice to see TGOD completed a strategic and accretive acquisition for approx. $20 million. TGOD will also provide HemPoland with an additional $10 million in cash for a rapid European expansion and this is an important aspect of the story.

HemPoland is a great fit for the TGOD brand and is a leading innovative organic brand with diverse, novel product offerings and unique intellectual property. In 2017, the company produced over 32,000 kilograms of organic dried flower and 310 kilograms organic CBD oils. HemPoland has been selling a premium CBD brand in the EU and is a recognized leader.

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