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THC Global’s focus on vertical integration is beginning to show dividends: The Green Fund

The company has secured significant cultivation capacity over two grow sites and an industry-leading bio-manufacturing facility.

THC’s manufacturing plant and validation labs in Southport, Brisbane
THC’s manufacturing plant and validation labs in Southport, Brisbane

THC Global Group Ltd (ASX:THC) is a medicinal cannabis producer with a vertically integrated business model and a farm-to-pharma strategy that aims to corner all aspects of the cannabis market.

Having secured both a significant cultivation capacity over two grow sites, and an industry-leading pharmaceuticals bio-manufacturing facility with attached testing and product development laboratory, THC is in prime position to service both domestic patients and the export market.

The following is an extract from an analyst report by The Green Fund, a global research house primarily focused on the cannabis industry:

THC operate a number of different subsidiaries, which have been structured to take advantage of their growing global strategy.

Canndeo

Canndeo is their Australian entity that has ODC-issued licenses and permits for both cultivation and Research & Development.

The permits are what separates THC from many of the other players who don’t have proper security cleared sites with suitable staff in order to be granted permits to commence cultivation/R&D under the respective licences.

THC Pharma and THC Pharma (NZ)

Then there is THC Pharma, their full-scale, Pharma-grade, extraction and research facility in Southport.

This state-of-the-art bio-flora extraction facility gives THC the ability to produce the highest purity, pharmaceutical-grade extracts.

Vertical Canna Inc.

Having legalised for adult recreational use in October last year, the Canadian recreational market has been booming.

There is a serious under-supply of legal recreational cannabis in Canada, and every Licensed Producer is producing as fast as it can to service this market.

THC Global has recognised this need and have launched their Canadian subsidiary, Vertical Canna Inc.

The company is gearing up to be a vertically-integrated Licensed Producer in the recreational, medicinal and nutraceutical markets that will also act as their investment entity for other vertically-integrated Canadian cannabis assets they may wish to acquire.

Crystal Mountain

And finally, they have Crystal Mountain, the company’s North American based hydroponics equipment and supplies retailer, and distributor.

This business subsidiary is already revenue generating and accounts for most of THC’s current revenue.

Many people forget about the ancillary market when they consider the cannabis industry, but there is much growth to be had in this area.

Vertical Integration

According to the CEO of THC Global, Ken Charteris, the company’s focus on vertical integration is beginning to show dividends as it transitions into manufacturing for the domestic market.

Charteris is a veteran of multiple biotech and pharmaceutical companies and clearly identifies with the issues facing the Australian medicinal market.

However, he is also quick to point out areas and changes that would drive escalation in patient growth and product demand.

Although THC has yet to finalise the growing permits for its’ NSW cultivation facility, the company’s international subsidiaries mean that it is one of the few Australian cannabis stocks that is currently turning a profit.

The jewel in the crown

It’s this fourth facility that potentially may have the greatest impact on the company’s fortunes in the short-term, particularly the next 24 months: their manufacturing plant and Validation Labs in Southport, Brisbane.

Although the facility is small, its’ output is anything but.

The cultivation plant is capable of producing up to 120,000 kilograms of oil per annum, while its’ ethanol based extraction facility, is built to cater to the extracts and concentrates market.

And it is clear as day how favourable we are on this sector.

The Bottom Line

Shares in THC Global reached an early high in 2018, hitting $1.00 a piece at the start of January.

However, the cannabis stock then proceeded to enter a year-long downward spiral before hitting an eventual low in December of $0.41.

The share price drop was caused in part by an industrywide decline that continued for much of 2018, as nervous investors abandoned their long position in favour of a staggered sell-off.

While this may seem like bad news for the cannabis manufacturer, the market appears to be generally bullish about the pot stock’s chances for 2019.

THC is expected to rebound on the back of future announcements from the company—such as further license approvals or international partnership agreements—which will likely cause a spike in share prices.

Disclaimer: This report is for general information purposes only. The Green Fund produced this report on behalf of the company described in this report and received fees on commercial terms for the production of this report.

Quick facts: THC Global Group Ltd

Price: 0.4 AUD

ASX:THC
Market: ASX
Market Cap: $54.67 m
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