Shares of Nutritional High International Inc (OTCMKTS: SPLIF) have been stuck in a narrow trading range since the New Year started. While the stock is a long way from its 52-week highs of $.45 a share, there's a lot we still like with SPLIF. Matter of fact, at current levels, the stock looks to be a discount entry opportunity. Taking a closer look at Nutritional High International, you will see why. SPLIF Daily ChartSPLIF BackgroundFirst up, for those of you that aren't familiar with Nutritional High International, here's a little background info. Nutritional High is focused on developing, manufacturing and distributing products under recognized brands in the cannabis products industry, with a specific focus on edibles and oil extracts for medical and adult recreational use. The Company works exclusively with licensed facilities in jurisdictions where such activity is permitted and regulated by state law.
The Company follows a vertically integrated model with a fully developed strategy for acquisitions in extraction, production, sales, and distribution sectors of the cannabis industry. Nutritional High has brought its flagship FLÏ™ edibles and extracts product line from production to market through its wholly-owned subsidiaries in California and Oregon, as well as Colorado where its FLÏ™ products are manufactured by a third-party licensed producer. In California, the Company distributes its products and products manufactured by other leading producers through its wholly owned distributor Calyx Brands Inc. and is entering the Nevada, Washington State and Canadian markets in the near future.
Calyx Brands Growth Engine
One of the key drivers of growth for Nutritional High International has been its wholly-owned Calyx Brands subsidiary. For the three months ended January 31, 2018, Calyx achieved revenue of approximately $5.7 million, representing an annualized revenue run rate of approximately $22.7 million. For the same period, the gross margin was 19.5% and the Company's total operating expenses were approximately $4.25 million.
Calyx continues to grow its distribution capability in the State of California and currently has distribution relationships with over 450 licensed dispensaries throughout the state. It is estimated that there were approximately 650 retail locations in California in the fourth quarter of 2018, increased from 450 in the third quarter of 2018 and the overall market remains underpenetrated2.
Calyx's curated distribution portfolio is comprised of 13 market-leading brands, including Nutritional High's own flagship FLÏ™. The product offering includes but is not limited to edible products such as beverages, natural fruit bites, gummies, and mints, as well as concentrates, flower, and pre-rolls. Adam Szweras, Co-Chair of the Nutritional High board, said:
"Since acquiring Calyx in March 2018, we have been able to rapidly accelerate revenue growth through capital injection and the joint management expertise of Nutritional High and Calyx. Based on Calyx's current market access of over 450 dispensaries in California, the management believes that Nutritional High's footprint represents a dominant market position in the California distribution landscape when compared to other players in the market."
Bottom Line
Currently trading with a market cap of $56 million, SPLIF is an undervalued cannabis play on the OTC Markets. The company is on an annual run rate of over $24 million. The stock is trading at just 2x revenues. This is a rare opportunity in the cannabis space and makes Nutritional High International a great buy at current levels.
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Disclosure: We have no position in SPLIF and have not been compensated for this article.
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