Rich says Zenabis Global (TSX:ZENA) (OTCPK:ZBISF) is “exploding” after news broke about an agreement with High Park Holdings—a Tilray (NASDAQ:TLRY) subsidiary—that will see Zenabis receive $30 million for a monthly supply of dried cannabis.
The deal, which will begin in October and will be paid in advance, caused Zenabis stock to shoot to a high of $2.23.
“This is a very exciting day because today’s the day that Zenabis has made our entire community thousands of dollars,” says Rich.
Details of the Agreement
Zenabis says it plans on fulfilling the High Park order within a year and explains that the deal will in no way affect its ability to supply its current customer base.
“Zenabis is well-positioned to supply high-quality cannabis to High Park via this non-dilutive financing arrangement that capitalizes on our rapidly increasing annual cultivation capacity,” said Zenabis CEO Andrew Grieve in a statement.
The company expects to reach a cultivation capacity of 131,200 kg of dried cannabis per year by Q3 2019, before deliveries to High Park are even scheduled to commence.
Furthermore, if Zenabis can devote all of its 660,000 square feet of facility space in Atholville, Stellarton, and Delta—in addition to its 2.1 million square feet of greenhouse production space in Langley—the company believes it can raise its annual yield capacity of dried cannabis to approximately 478,800 kg.
“These guys are going global,” says Rich, noting that Zenabis plans to use its increased design capacity to reach both national and international market.
Zenabis Extends Credit Facility Under “Reasonable Terms”
The good news arrived just hours after Zenabis’s announcement that it signed an amendment to extend the maturity date of its $25-million facility to July of next year. All other aspects of the facility will remain essentially unchanged.
Grieve said he believes that refinancing will leave the company “in a preferred position” to end its debt in 2020.
Zenabis is Undervalued Compared to Peers
Following Zenabis’s double-decker announcements, GMP Securities analyst Justin Keywood told CanTech Letter that Zenabis is a “buy” as the company’s valuation is well below similar sized cannabis cultivators.
Keywood believes Zenabis will soon become “a top five Canadian LP supplier,” and that the company’s valuation will re-rate higher as its annual cultivation capacity of dried cannabis continues to grow past 131,200 kg.
“I brought this pick at $1.54 and told everyone that it was the most undervalued, underappreciated, underexposed cannabis stock in the world,” says Rich.
“So congratulations to anybody who was able to take advantage of that move, and I honestly believe this is just the beginning.”
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