Puration Inc (OTCMKTS:PURA) has put out a number of press releases over the last few months alluding to its entrance into the cannabis travel tourism space. Alongside the press releases have come management derived claims of some pretty big numbers, and these numbers are resulting in an upside push for the company’s market capitalization.
On the face of it, the whole strategy seems a little complicated. However, dig a little deeper, and it’s not all that strange, and in fact looks as though it could genuinely bring about some decent activity for Puration and its affiliates. In turn, it could serve up some PPS gains medium to long-term.
Here is our interpretation of the arrangement, and what we are looking for going forward.
Towards the end of last year, the company put out its so called $3 Million Cannabis Extraction 1st Year Revenue Plan. Readers can take a look at the plan here, but in summary, it basically says Pura is going to enter into three collaboration agreements over the coming year, and that each of these will see the company generate $1 million revenues from a cobranded cannabis extraction product. It’s optimistic, but it gave markets something to go on from a valuation perspective, and ultimately translated to some upside based on (albeit) speculative expectations.
More recently, however, the company has built on these three million-dollar expectations, suggesting it expects a further $1 million “bonus” tacked onto 2017 top line. This extra $1 million derives from the travel tourism space.
So where is it coming from?
The company has signed an agreement with a company called ML Capital Group Inc (OTCMKTS:MLCG), which, as per its own explanation of its operations, is a cannabis consultancy company. However, the company already operates luxury travel operations in Hawaii, and is attempting to integrate these luxury travel operations into a full suite offering that combines Puration’s cannabis fusion operations with ML’s travel activities.
In the words of the two companies, not Insider Financial, Puration wants to develop cannabis inspired tours that mimic those offered by the Napa Valley region in California, only with marijuana and cannabis infused drinks instead of grapes and wine.
It is a pretty big claim, and one that is likely going to take a long time to materialize. The cannabis industry is still very immature, and while we do expect some degree of segmentation in the same way the wine industry is segmented into more the elements than just wine drinking, these aren’t going to come into play until the regulatory side of the industry is ironed out, and in full swing.
With that said, being one of the first movers in the space isn’t a bad thing, and if the two companies can lay the groundwork for something that brings in value father down the line, then we should see a certain amount of this potential value represented nearer term in its market capitalization. That’s probably what we’re seeing right now, and why Puration is up more than 250% year to date.
So, what’s next?
Well, as mentioned, this tourism aspect of the company’s operations is likely going to be a slow burner, but any development has the potential to inject some upside momentum in a company of Puration’s current size. As such, we are looking for a positive news stream to help the company maintain support at its current price, and some degree of quantitative reinforcement of the $3 million-$4 million revenue claims as quarterly numbers hit press.
We’re also looking for the closing of the deals that will bring in the $3 million outlined as part of the above discussed plan. One is already in the bag, so there’s two left to hit press.
Dilution could be a problem near term, as Puration raises capital to fund its expansion into the above discussed operations. However, that is pretty standard at this end of the space, and so long as management can minimize the impact on shareholders, there should be some upside potential on an early-stage allocation.
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Disclosure: We have no position in PURA and have not been compensated for this article.