High Cannabis Stock Valuations in Focus at Panel

- September 20th, 2018

Cannabis representatives at the Extraordinary Future conference in Vancouver gave their views on valuations in the industry, the entrance of established players and the power of branding.

A panel of cannabis experts shared viewpoints and predictions for the industry on a global level at day two of the Extraordinary Future conference in Vancouver on Thursday (September 20).

Hosted by Peter Guo, BC leader of enterprise risk services with MNP, the panel included: Rosy Mondin, CEO of Quadron Cantech (CSE:QCC); Chris Wagner, CEO of Emerald Health Therapeutics (TSXV:EMC); and Danny Brody, vice president of investor relations with the Green Organic Dutchman (TSX:TGOD).

The panel started with a question on what’s causing the current valuations in the market and what investors should know before getting in or out of the sector.

Wagner reminded the audience that the market valuations take into the consideration the next six months of development, and may be a cause for some of the extreme cannabis estimations seen in the market at the moment.

The Emerald Health executive highlighted that the US listings for some Canadian producers have opened the doors for retail investors to gain exposure to cannabis.

“[Retail investors] are enjoying the fact they can invest in a NASDAQ company or New York Stock Exchange company so I believe it’s retail driven,” Wagner said.

Brody explained cannabis valuations are still dominated by speculation and rumors.

“For traditional metrics, I think you can almost throw all that out the window for the LP market right now … there’s a lot of speculating down [in the US] driving the industry,” Brody said.

The investor relations representative predicted that regular valuations for public companies will begin dominating the industry again soon.

“We can build the facilities here, build the technology, build the infrastructure, but the real market is going to be international, it’s going to be in Europe, South America, global.”

Brand power within the cannabis space

Mondin told the audience that cannabis should be seen as a base ingredient, and brands will be the product able to move between jurisdictions.

Her company has a direct focus on the cannabis extraction market. The executive said it plans to hold five Canadian facilities, sell machinery for these and also sell fully decked out facilities to other cannabis businesses.

“Everyone is going towards extraction,” Mondin said at a later panel from Quadron.

Brody compared the cannabis industry to the consumer packaged goods (CPG) sector. He also highlighted that the true value for the industry will be in brands.

“At the end of the day, it’s a product that’s going to be packaged up and the value is going to be in the brand, very similar to any other CPG industry,” Brody said.

“Like any other CPG industry, there’s going to be two to three majors. The rest will get acquired or fall by the wayside, so I think we’re in for a very exciting 2019, 2020 and beyond.”

When asked about the entry of other consumer good companies into cannabis, Wagner explained that realistically only about 50 cannabis companies in Canada could lock down deals with the major industry players moving into the space.

As the entire cannabis market is on hold to see which other established industries will seek an entry, the Emerald Health executive guessed pharmaceutical companies are next.

With legalization a few weeks away in Canada, companies have already been researching and preparing for the opening of the edibles and infused markets. The panelists explained how consumers haven’t been able to obtain the same experience through black market products.

“People want consistency and predictability,” Brody told the audience. The Green Organic Dutchman representative added that so far in the cannabis consumer experience that type of repetition hasn’t been possible to replicate.

Brody explained that the mainstream market will understand and seek edibles and other similar novel delivery methods once it’s known there will be consistency every time a product is consumed.

The Green Organic Dutchman has placed bets on this type of product being best represented through cannabis-infused beverages, which have taken off as a trend for cannabis companies to embark on.

On Monday (September 17), rumors appeared of the Coca-Cola Company (NYSE:KO) being interested in a partnership with Aurora Cannabis (TSX:ACB) to develop wellness beverages with cannabis.

Investor takeaway

Although investors are facing volatile times with cannabis stocks, one key takeaway from this panel of experts is the expectancy that established metrics and values are soon to arrive and will potentially bring stability back into the market.

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.

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