The Canadian cannabis space has been dominated by a number of companies which were initially set up to research on its medicinal attributes but have now come to be beneficiaries of the legalization of the recreational use of the drug.Few companies, however, have benefited nearly as much as AURORA CANNABIS IN (OTCMKTS:ACBFF).Events leading to this past week have seen its share price surge nearly 50%, rising from just above $2.10 to highs of nearly $3.20 a share. ACBFF Daily ChartThis price rally has gotten both the market players and ourselves focused on what exactly has warranted it.It is our view that such a surge only goes to accentuate either some good news that was released by the company or the markets’ expectation that the value creation from some of the projects they are currently engaged in, both of which hold water when looking at ACBFF.We have therefore dedicated considerable time and resources into looking at Aurora Cannabis Inc as we seek to get to the bottom of the question: is the company really generating value for its shareholders or is this simply another market ploy that will end up hurting investors over its term?As we dive into the issue, we expect to give investors a clearer perspective on the same.However, for the sake of investors with rudimentary understanding of the company, let us introduce ACBFF to you.About ACBFFACBFF was founded in 2004 in British Columbia, Canada with the aim of exploiting the medicinal cannabis space in the country. Through its wholly-owned subsidiary, Aurora Cannabis Enterprises Inc which is a licensed producer of medical cannabis pursuant to Health Canada's Access to Cannabis for Medical Purposes Regulations (ACMPR).Since then, the company has grown to an over $1 billion entity with significant investments in the cannabis industry both in Canada and worldwide.With investments such as Radient Technologies Inc and Cann Group Limited, the company has made tremendous feats and been on a tremendous upward trend both within Canada as well as globally.It is against this backdrop that we seek to explain the new projects taken up by ACBFF in the next section.Recent Developments Though continuing, this began on 10th October when they opted to raise $50 million through the sale of 16.7 million shares at $3 per share.The move took a turn for the better.Courtesy of an oversubscription to the same, the company had to later adjust the figure upwards to fit in the excess cash supply that came their way and on 2nd November, they moved the figure upwards to $69 million while issuing a further $6 million in private placements.Such speaks only to one thing, the market’s belief in the future of ACBFF with the market taking up the riskier asset as opposed to debt.They didn’t stop there.They went further to obtain a cultivation license for their new 40,000 square-foot facility in Pointe-Claire, Quebec, a facility with the production capacity of 4,000 kilograms of high-quality cannabis per annum.This is, however, small when compared to the 800,000 square-foot Aurora Sky facility under construction at Edmonton International Airport, a facility so big the company had to partner with Radient Technologies Inc who would provide production and extraction services to them at a subsidized rate while using their MAPTM technology.Their services, though not limited to production, will go a long way in ensuring that ACBFF generates revenues synonymous with no other firm in the industry.According to the company CEO, Terry Booth:
"The market for non-smoked derivative cannabis products is growing at a remarkable pace, and through this agreement we have a cost-effective and scalable means to help meet this demand - particularly once we begin harvests in the first half of 2018 at our 100,000+ kg per annum Aurora Sky production facility. We intend to continue our collaboration with Radient on other R&D projects that we expect will deliver significant value to both companies."
Source:Finally, the company is also venturing into the online space. This will be done through their partnership with Namaste technologies who will enable them begin marketing and selling vaporizer products through their site. Their main aim is to ensure their brand is well recognized especially with their aggressive expansion strategy into the rest of the world.ACBFF, which has seen over 200 orders per day since the launch of the site, believes that its entry into the digital space is way overdue and that this will serve as a significant money maker for them going forward.All the above have alluded to the fact that ACBFF is growing quite fast. We would like to test whether this hypothesis is also reflected in their financial statements.Financial PerformanceThe $1 billion company has a lot going on for it especially in terms of financial performance.The company began with a jump in its revenues between 1Q2017 and 2Q2017 with the number closing at over $4.5 million, a 17.85 percent jump from $3.8 million. Moreover, their gross profit margin stood at 98.5%, quite significant for a company within this industry.In a deeper analysis, these revenues were further pro-rated between four different segments.First, their revenues were obtained 97.6% from Canada and 2.4% from Germany. With such high revenue weighting coming from an already established market, we chose to focus on the remainder which came from Germany. This amount, as we earlier stated, is driven by their investment in a subsidiary: Pedanios.Pedanios which is a leading wholesale importer, exporter, and distributor of medical cannabis in the European Union ("EU"), based in Germany, is making headway in the area of marketing the products within this region. This, coming in the backdrop of adoption of marijuana within the EU (with Denmark currently joining in), is a major play by ACBFF going forward.Furthermore, their revenue is further split 88.1% and 11.9% between Medicinal Cannabis and Patient Counselling respectively. As the company begins investing resources to the latter while boosting their investment in the former due to the emergence of recreational cannabis, we expect a much more significant rise in their sales going forward as well as a much higher contribution from Patient Counselling.During the same period, their working capital jumped 38% and their shareholder equity by 39% to close the period at $131 million and $168 million respectively. With management aiming at expanding, the company now has a strong financial base from which they can engage in such endeavors.Moreover, the company is finally cash flow positive having netted over $3.6 million in operating cash flows, up from negative position of $6.8 million in 1Q2017.Such success has made ACBFF the envy of other cannabis companies throughout the industry. Our take therefore is that the company, given their growth trajectory and financial position, warrants the high valuation they have received and this isn’t the best yet for them.Growth is imminent for ACBFF.ConclusionACBFF is growing steadily and fast. Their position within a growing industry further accentuates their trajectory and goes to show that there is no limit to their highs. Investors should take a closer look at this cannabis company which in our view, is growing like a weed.For the full story, check out our complete coverage on ACBFF.We will be updating our subscribers as soon as we know more. For the latest updates on ACBFF, sign up below!Disclosure: We have no position in ACBFF and have not been compensated for this article.
Discover Hidden Gems
Don't miss the next big opportunity. Subscribe for timely alerts on potential market movers.
