The North American cannabis industry is expected to exceed $20 billion in size by 2020, according to Research and Markets, representing a nearly 30% compound annual growth rate. There are many different opportunities for investors on both sides of the U.S.-Canadian border, but few companies offer investors all-in-one exposure to the best segments of both markets, particularly with pure-play exposure to cannabis cultivation and harvesting.
In this article, we will take a look at Maple Leaf Green World Inc. (TSX.V: MGW) (OTCQB: MGWFF) and its presence in three of the largest medical and recreational cannabis markets throughout North America where it has established cultivation operations.
Presence in Top U.S. Markets
The United States’ cannabis industry received a significant boost in November 2016 when voters in several states voted to legalize recreational marijuana – including California and Nevada. In addition to being an estimated $7 billion market for the drug, California’s move to legalize recreational use of the drug could mark the beginning of the end of federal prohibition by forcing the government to deal with issues like banking access.
Maple Leaf Green World operates a joint venture with a non-profit co-op collective located near Palm Springs, CA. The company built two greenhouses on a 20 acre property that it purchased and currently harvests between 100 and 150 pounds of medical marijuana six times per year in a continuous cycle. With enough space for 100 greenhouses, the company has ample opportunities to expand with recreational legalization in the works.
Nevada voters also voted to legalize recreational marijuana in one of the most promising tourism markets in the country. With over 40 million tourists per year, Las Vegas has become a popular destination for both Americans and international tourists. The state’s reciprocity laws already enable out-of-state medical marijuana card holders to access the drug, but recreational legalization could make the state a top-3 consumer.
Maple Leaf Green World is in the process of acquiring a cultivation license in Nevada through its acquisition of BioNeva Innovations of Henderson LLC, which owns and operates a 33,500 square foot cultivation facility that’s pending approval in Henderson – just 15 minutes from Las Vegas. The move could provide the company with a valuable footprint in the Nevada market that’s in close proximity to Las Vegas’ significant tourist economy.
Near-term Canadian Approval
Canada legalized the cultivation of medical cannabis on a national level back in July 2013 with the Marihuana for Medical Purposes Regulations (MMPR). Since then, the government has approved nearly 40 licensed producers and amended the rules to become the Access to Cannabis for Medical Purposes Regulations (ACMPR). Prime Minister Justin Trudeau’s election also set forth the path to recreational legalization over the coming year or two.
Maple Leaf Green World is in the last stage of approval (Stage 5) to become a licensed producer under the ACMPR program. With an 80,000 square foot facility under construction, the company could become one of the largest licensed producers in the market. The company also has the potential to build up to 300,000 square foot of greenhouses on properties that it has under its control if expansion makes sense down the road.
Section 35 of the ACMPR regulations provides that: “[T]he Minister must, after examining the information and documents required under section 33 [ACMPR Application Guidelines] and after all of the security clearances required by section 34 [Security Clearance Stage] have been granted under section 112, issue to the applicant a producer’s license.” This means that a license appears imminent if it’s able to pass the final inspection.
With many licensed producers trading with market capitalizations ranging from C$100 million to C$2 billion, the company’s modest C$82 million market capitalization makes it a compelling value in the licensed producer space. This is especially true considering the company has operations in California and Nevada that provide access to the rapidly growing U.S. market in addition to the federally-legal Canadian market.
Maple Leaf Green World Inc. (TSX.V: MGW) (OTCQB: MGWFF) represents an intriguing investment opportunity in the North American cannabis industry. With a presence in both U.S. and Canadian markets, the company provides diversified exposure to the cultivation side of the industry, while its modest C$82 million market capitalization makes it a potential value.