Implementation of a successful business model has always been a critical success factor for businesses. The latter drives institutions towards the actualization of their full potential while ensuring that their shareholders see the implementation and realization of their envisioned value. Therefore, when analysts review entities and perceive all the above as having been implemented, perceptions in the market pertaining a specific stock turn bullish.
This has been the case for Auxly Cannabis Group Inc (OTCMKTS:CBWTF).
Recent reports by analysts have spoken to the firm having a positive outlook towards the company, especially on the firm’s strategy implementation. The report alludes to the firm having successfully targeted and penetrated the different market segments and created a niche for itself therein, allowing for their stellar financial performance as a result.
The result has been a remarkable share price performance. Over the past two months, the stock has continued to enjoy a bull run which has led to their price rising from $.56 to highs of about $1.17, a 108% surge in prices. Currently, the stock trades at $1.1 as of Oct 17, 2018. The chart below explains this price action:
Moreover, there has also been a surge in the traded volumes of the stock which have risen to an average of over 7 million this past week. The number was especially significant on Oct 16 when the traded volumes increased to nearly 4 million, speaking to the high momentum associated with the stock.
The volumes traded and resulting price surge are shown in the chart below:
With the firm exhibiting some of the factors associated with being a high momentum stock, CBWTF came into our spotlight and we thus opted to analyze it. This piece goes into their strategy and evaluates what the firm is working at implementing as well as its current and future impact on the firm’s financial performance and consequent actualization of the value proposition pitched to its investors.
CBWTF: Past and Present
Auxly Cannabis Group is a company operating in and passionate about the cannabis industry. It brings together entrepreneurs, product developers, researchers and marketers within the industry thus creating a partnership of the industry’s top-level individuals. Through this, the firm works towards curving its niche and executing the strategies set out by its best-in-class management team.
The firm’s mandate entails the facilitation of growth for their partners through the provision of both financial support as well as industry experience. This diverse group of partners shares common interests with CBWTF thus work hand in hand to ensure that they are met.
Auxly Cannabis Group Inc was founded back in 1987. Back then, the firm was dubbed Cannabis Wheaton Income Corp – we have been tracking the firm and our most recent report of them is available here – a name which changed in June 2018. Currently, it is headquartered in Toronto, Canada.
The Recent Report
A recent report by Traders News Source, a leading small and mid-cap equity-focused research company, showed in detail the value proposition expected of CBWTF. The report focused on four key aspects: the industry analysis, business model, financial performance and risk factor analysis. These are looked at in the section below.
The cannabis industry has continued to flourish especially within Canada and the United States. All through, the continued legalization of the drug federally – expected – and within the different states has seen the market size continue to grow drastically. A market research report by CIBC World Markets shows that the cannabis market is expected to grow to $6.8 billion by 2020 in market size with the industry’s EBITDA expected to stand at $1 billion – distributed between manufacturers and retailers at 85% and 15% respectively. This figure further grows globally as the global market size stands at $30 billion.
CBWTF is working towards ensuring that they carve out a piece of the pie for themselves through continued implementation of their business model. This model is expected to see them integrate their business vertically: the upstream, midstream and downstream. The result will see them support an end-to-end business whereby cultivation through to distribution and catered to. The above is expected to be achieved through both business partnerships as well as intellectual property rights (midstream).
One key goal has been achieving efficiency of this process which would see a minimization on resource utilization thus ensuring profit maximization for the firm. This has thus far been achieved as their financial performance continues to portray.
Over the past period, CBWTF produced stellar financials.
During this period, their working capital base stood at $303 million. Their last quarter saw their revenues rise to $282,000 up from a zero value while their total asset base grew by 417% to $478 million. Through capital raising, about $302 million was raised to help finance different projects the firm expects to undertake. Despite this, their expenses associated with the continued expansion of services also rose by over $9.5 million to $11 million.
However, it is expected that once their strategy is fully implemented, the firm’s efficiency will be higher thus the above costs will be minimized. A key problem they may face (a risk for them) is the scalability problem. As a result of the laws of Canada, there are a lot of factors to be considered while growing cannabis, most which disallow the growth of cannabis to scale.
The latter, despite being a problem, is currently being mitigated by CBWTF. With their cannabis production expected to stand at 160,000 kilograms by 2021 and with the firm continuing to foster partnerships, it won’t be long before their goal for scalability and consequent growth is achieved.
Given the current trajectory which CBWTF has continued to follow, the firm is headed for success. With their current strategy focused on vertical integration and partnerships, the firm is expected to continue on its current growth path and eventually rise much higher.
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Disclosure: We have no position in CBWTF and have not been compensated for this article.