Börse Express – A new cannabis supply that goes beyond Aurora Cannabis and Canopy growth

Major Canadian cannabis stores had a downturn. Aurora cannabis (WKN: A12GS7) in the first trading week at the New York Stock Exchange began terribly. Growth of the crown (WKN: A140QA) lost more than 25% of market capitalization last week.

But there is a new supply of cannabis overflowing in the storm. The success of this stock is avoided this year by Aurora, Canopy and almost all other cannabis.

So what is this? Original house (SIN: A2DH0P). It was traded on October 22 on the Canadian Stock Exchange (CSE) and on the US open market. Only the original house is not completely new.

Under a new flag

Until last week, the original house was still known as CannaRoyalty. What's the name change? Well, the company wanted a new integrated identity, which clearly showed that it became "an exceptional brand of marijuana cannabis".

CannaRoyalty named the company's source. The actual business model focused on the flow of cannabis where the company financed marijuana companies in return for the percentage of production or inclusion of crops. But the strategy of the company has changed over time.

Origin House now focuses primarily on the distribution of Cannabis products in California. The US State is the largest legal marijuana market in the world. The original house is number 1 on the cannabis market in California.

The company currently has more than 50 merchant partners. Sells over 130 branded cannabis products to approximately 70% of California's California retail markets. The house also owns and markets several of its own brands.

But while the original house is the main player in the huge market in California, Canada has a foot in the door. In September, the company announced it would acquire 180 Smoke, a leading Vape seller with 26 stores and a strong online presence.

Good options

New name, new logo and new stock exchange: Origin House expects good times to start. Director Marc Lustig said that the first half of 2018 in California was a bit difficult because the market for recreation that deals with the country was concerned. But now Lustig finds that the situation is "pretty big".

He was convinced that the original house in 2019 would be profitable. Technically, the company generated profits in the second quarter. However, the positive result was the result of a gain in the sale of assets. It seems that the source house is on the right path to sustainable profitability.

At least one analyst believes that the source house will generate nearly $ 200 million next year, and $ 425 million by 2020, which is about $ 325 million. Origin House has no sales forecast yet, but analytical estimates should be feasible.

Lustig said that the company currently generates approximately 70% of its sales by sales and 30% with its brands. Its goal is to shift revenue by almost 50:50 by 2019. Origin House plans to achieve this by introducing a new brand per month.

This is part of the three-way long-term Origin House strategy. First, they want to expand the base as a leading cannabis seller in California. The second phase is to encourage data derived from their sales activities in order to accelerate further – to create more successful brands and to promote existing trademarks on the Californian market.

The third phase of the Strategy of the Originating Houses could be paid in the long run. The company intends to reiterate its success in California also on other high-growth markets. Buying 180 smoke is an example of this strategy. Lustig suggested that the original house could expand in the future to the neighboring Nevada. It is determined that the company will rather discipline rather than enter new markets without first having a solid basis for it.

Better than big players?

As I have already said, the original house easily matches the stocks of most other hemp supplies, including the two largest ones: Canopy and Aurora. But is Origin House as a long-term investment better than the big players in the industry? I think so.

The Beacon Securities investment firm believes that distributors and retailers could be the top brand of cannabis brands. I agree, especially as far as the US market is concerned. Origin House is well positioned to circulate some of its own trademarks in addition to its brand partners.

Growth Canopy, Aurora Cannabis and others are hand-bound when it comes to working in the US. But not the original house. We must not forget that the USA represents 85% of the world's total cannabis market. Even with the Canadian recently launched market for non-prescription marijuana and the market for medical cannabis allowed elsewhere, the US will still produce almost three quarters of cannabis sales by 2022.

Then the rating. Even after the recent fall, Canopy's market capitalization is almost $ 8 billion, while Aurora's market capitalization is almost $ 7 billion. The market capitalization of Origin House is closer to 300 million US dollars. With an income potential of $ 250 million by 2020, stock valuation based on its real growth potential will be very attractive in a short period of time. You can not say this about large cannabis stores.

In August, I said CannaRoyalty was the best, somewhat unknown cannabis stock. But that's not true anymore – now this is the honor of Origin House.

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Motley Fool recommends Origin House shares. Keith Speights does not have any of those stocks.

This article was published on October 28, 2018 at Fool.com. It has been translated so that our German readers can participate in the discussion.

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