Next Green Wave (NGW:CSE 70 cents / NXGWF:OTCQB) – www.nextgreenwave.com
March 12th locked down a GREAT acquisition:
I have been discussing this quarter that marketing and distribution (shelf space or online) is both valuable and critical to these Cannabis companies.
And NGW will now own one of the leading companies in this space (SDC Ventures) with tremendous market penetration and brands – including Carey Hart, the husband of Pink. The news release (above) shows everyone associated with SDC but here is a snippet:
In 2019/20 I am confident they will leverage this into a Cannabis (CBD / THC) powerhouse in California (a market that meets or beats Canada’s).
From my valuation table of growers (and everyone else in this industry) it appears they secured this for a VERY attractive price. When you now combine the growing capacity (and licenses) with the skill-set and market penetration of SDC, I think it is fair to move NGW into an entirely different valuation category.
Those valuation tables are available here:
The picture I am trying to make is this:
NGW at 70 cents has a market cap near $80 Million CDN (which includes almost $20 million spent to date on buildings and equipment). The acquisition today is approx. $27 Million CDN but a chunk of that is earned on future revenue growth.
When we factor it all in, the valuation near 70 cents is just over $100 million for the combined company.
If you look at my valuation comparables, there are many growers (in various regions) with similar facilities and size-able revenue targets for 2019/20 BUT they will not have the marketing and celebrity power OR the extensive distribution network of SDC.
Similar comps from the peer valuation table are valued from $120 Million to $800 Million. Some of the higher valued companies have big bank accounts but their revenue growth to date has been minimal. These same companies will desperately need marketing and shelf space – and as we are seeing with Canopy Growth and Aurora, this aspect of their business can get incredibly expensive.
If NGW is currently valued near $80M and the new company $27M, I see no reason once they get traction as a combined company that they shouldn’t be valued somewhere in the range of $120M to $800M – assuming sector valuations continue to hold up.
HERE IS THE PDF REPORT I DID ON NGW IN FEBRUARY – DISCUSSING THEIR OPPORTUNITY IN CALIFORNIA