CannTrust CEO Talks “Precise” Strategy

While he may be a newcomer to the marijuana space Peter Aceto, the CEO of CannTrust Holdings (TSX:TRST) feels pretty comfortable with how fast paced the cannabis industry is.

“I’m used to fast and I’m used to nimble… but the cannabis space is moving so quickly, so rapidly, it’s fascinating and amazing.” the executive told the Investing News Network (INN) in a phone call.

He can’t yet brag about the amount of road shows or pot conferences attended compared to his peers but CannTrust’s chief is starting to see how fast he has to move to keep up.

Aceto previously served as the CEO for online bank Tangerine, now a division of the Bank of Nova Scotia (Scotiabank) (TSX:BNS), a job he said taught him how to be nimble and fast.

The new executive took over the mantle last year from co-founder Eric Paul, who stepped down two-weeks prior from the adult-use legalization in Canada on October 17.

After finishing a quick stint at the Lift & Co. (TSXV:LIFT) Cannabis Business Conference in Vancouver, only to be whisked away back to Toronto right after his panel conversation, Aceto detailed the path CannTrust is in. While other companies may be racing for expansion or taking a slow and methodical approach, he instead wants it to be somewhere in the middle.

When asked about the pace of the industry and the acquisition plans for his company, especially compared with the quick expansion and asset leveraging from licensed producers (LPs) CannTrust is directly competing with, Aceto explains he doesn’t want his company to rush and end up paying the cost later.

“We want to be bold, we want to be aggressive but we want to be thoughtful then precise and we want to make sure that we have the ability to execute on all the things that we do,” said Aceto. “Rushing at the door and spending lots of money for us doesn’t seem like a prudent approach.”

Aceto explains for him, the need of expansion or other mergers and acquisitions is the way to move forward in the global landscape. The company has created joint ventures in Denmark and Australia to deploy its international strategy.

He admits a slow methodical approach will leave CannTrust behind in the LP race. Particularly in 2019, he expects “reckoning” to come for Canadian firms in the cannabis space.

Analysts and observers of the industry are expecting a market compression to settle in the public markets as companies face economic pressures and high scrutiny from investors.

“I would think some big people are going to be held to account for how they’ve allocated their capital and we are trying to find the right balance of being bold and growing and expanding but having focus in our execution.”

NYSE listing comes at a much needed time for the company

After Cronos Group (NASDAQ:CRON,TSX:CRON) became the first Canadian LPs to publicly list in a senior US exchange, the producers moved quickly into these spaces finding bigger platforms for their companies and offering investors a more secure guarantee of their positions.

CannTrust reached the Toronto Stock Exchange (TSX) after uplisting from the Canadian Securities Exchange (CSE) in August 2017. CannTrust took longer than some of its peers to reach a US exchange.

Earlier in January, the company finally confirmed its application for a listing on the New York Stock Exchange (NYSE).

If confirmed the company would join Canopy Growth (NYSE:CGC,TSX:WEED), Aurora Cannabis (NYSE:ACB,TSX:ACB) and Aphria (NYSE:APHA,TSX:APHA) as the only Canadian LPs trading on the NYSE.

In a note to clients published in January, Beacon Securities analyst Russell Stanley praised the company for the potential listing, indicating gaining the attention from the American investor audience would expand the company’s profile.

Stanley holds a “Buy” rating for the company and a one-year price target for its stock in Toronto of C$21. The analyst sees CannTrust stock as “significantly undervalued.”

Based on three analyst targets for the stock, according to analyst research aggregator TipRanks, CannTrust holds an average C$20 price target per share.

Aceto adds the NYSE listing will allow the company to gain exposure with institutional investors, not only in the located in the US but all over the world.

“There’s no doubt in my mind that investors all around the world in particularly institutional investors have an increasing awareness and willingness to enter the cannabis space,” the executive said.

As the race between the leading LPs intensifies, CannTrust continues its path towards growth and with a US listing a raise in its profile.

Pelham confirmation gives CannTrust chance to deliver on promise

CannTrust faced questions from investors and analysts as the company was caught in the middle of a bylaw preventing for the development of land for marijuana facilities in Pelham, Ontario.

Pelham serves as the home to CannTrust’s facilities and was the planned location for its phase 3 expansion.

“The most prudent thing to do at this time is take a bit of a pause and work together to solve these issues,” Pelham mayor Dave Augustyn said at the time of the bylaw getting approved.

However, on Tuesday (January 22), the company announced it had secured an agreement with the Ontario town and would move forward with its expansion.

CannTrust received approval for an expansion with a footprint of up to 390,000 square feet instead of the originally planned 600,000 square feet. The Canadian firm assured investors it would still deliver on its forecast of 100,000 kilograms production per year once the phase 3 was completed.

The timeline from CannTrust now indicates its phase 3 expansion will be completed by the third quarter of 2020, with the full capacity to produce being reached by the second half of 2020.

During the Canaccord Genuity Group (TSX:CF) “Growth Investor Day” in Vancouver, Aceto clarified the company and Pelham had come to a mutual understanding. Due to community complaints CannTrust will remodel some of the details of its expansion to prevent lighting issues.

“In order to address local concerns from the emission of light from its facilities, CannTrust is proceeding to add additional fan ventilation so its shades can be completely closed, at minimal incremental cost,” the LP notified to investors.

Aceto said the main concerns raised by the community for all cannabis operations in their community were the increase in density with significant car movement and the smell from the cannabis operations.

Investor takeaway

Aceto won’t waste any time to highlight the aspects of the company he says puts it ahead of others – its growth style, its medical presence in Canada with just over 50,000 patients, and its much promised “innovation” in novel cannabis products.

Now after obtaining its approval from Pelham CannTrust will be closely watched by investors to deliver on its promise of final production numbers.

“I think CannTrust value come is way beyond our ability to grow 50,000 kilograms or a 100,000 kilograms or even 200,000 kilograms,” he told INN.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.