Village Farms International Inc (NASDAQ: VFF) has been one of the top performing cannabis stocks of 2019. The stock started 2019 at $3.24 a share and has risen 382% to just over $15 a share. We said back in February that the stock was a breakout play and our subscribers have been rewarded handsomely. As we take a look at VFF and the rest of 2019, there’s still a lot to like with Village Farms International.
First up, a little background info for those that aren’t familiar with VFF. Village Farms is one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada.
Village Farms produces and distributes fresh, premium-quality produce with consistency 365 days a year to national grocers in the U.S. and Canada from more than nine million square feet of Controlled Environment Agriculture (CEA) greenhouses in British Columbia and Texas, as well as from its partner greenhouses in British Columbia, Ontario, and Mexico.
The Company is now leveraging its 30 years of experience as a vertically integrated grower for the rapidly emerging global cannabis opportunity through its 50% ownership of British Columbia-based Pure Sunfarms Corp., one of the single largest cannabis growing operations in the world. The Company also intends to pursue opportunities to become a vertically integrated leader in the U.S. hemp-derived CBD market, subject to compliance with all applicable U.S. federal and state laws.
Village Farms has established a joint venture, Village Fields Hemp, for multi-state outdoor hemp cultivation and CBD extraction and plans to pursue controlled environment hemp production at its Texas greenhouse operations, which total 5.7 million square feet of production area, subject to the legalization of hemp in Texas.
Strong Q4 report
Last month, Village Farms surprised Wall Street and Bay Street with a beat on revenues and a profitable fourth quarter. Net income improved to positive US$0.3 million, or US$0.01 per share, and included the contribution of positive net income from Pure Sunfarms Corp. (“Pure Sunfarms”) of US$2.8 million. Sales, including the Company’s proportionate share of Pure Sunfarms’ sales, increased to US$40.6 million compared with US$36.9 million. EBITDA was US$1.5 million compared with US$2.6 million. EBITDA included $0.9 million from Pure Sunfarms.
Pure Sunfarms generated positive net income of US$5.5 million for the fourth quarter of 2018, the first full quarter of sales (Village Farms’ proportional share is US$2.8 million). The company received multiple amendments to its cultivation license from Health Canada, resulting in the successive expansion of its licensed production area to the entire growing area of 1.03 million square feet in March 2019. Pure Sunfarms was selected by and entered into a supply agreement with the Ontario Cannabis Retail Corporation (“OCRC”), operating as the Ontario Cannabis Store (“OCS”), to supply the OCS with Pure Sunfarms branded cannabis products for the non-medical market in the Province of Ontario. Pure Sunfarms also entered into a wholesale supply arrangement with one of the largest online platforms for medical cannabis users in Canada, through which a selected variety of Pure Sunfarms high-quality dried flower products will be available for purchase.
Currently trading with a market cap of $750 million, VFF is one of the most exciting plays for cannabis investors. While the stock has had an impressive run year-to-date, we believe there’s much more room to run, especially considering that VFF is still trading under the $1 billion market cap mark. As the cannabis bull run progresses, we expect VFF to have a market cap of several billion dollars, making VFF undervalued still at current levels.
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Disclosure: We have no position in VFF and have not been compensated for this article.