Prospecting In Australia's Marijuana Story

Value Digger

The marijuana stocks have attracted a lot of interest over the last months, as noted in our previous marijuana article here. Given that more and more investors want to become familiar with the sector, the previously linked article is a Must-Read.

Truth is that many investors have missed the marijuana train and try to catch up scrambling to find the laggards in the sector and participate in "the marijuana party". Their key concern right now is that both the Canadian and the US-based marijuana stocks have doubled or tripled over the last weeks, as shown by the recent performance of Horizons Marijuana Life Sciences Index ETF (HMMJ.T) and ETFMG Alternative Harvest ETF (MJX).

Actually, these are today's (01/08/2018) cannabis industry averages for the Canadian and US-based firms, as shown in our database:

Price/Projected Earnings: Above 600 times

Price/Projected Sales: Above 200 times

Price/Book: Above 15 times

Price/Projected adjusted EBITDA: Above 300 times

As a result, these sky high multiples scare the experienced value investors who are very cautious about which marijuana stocks to pick.

But the hope for an entry point in a marijuana stock with significant upside and limited downside might not be lost. This hope might lie in Australia thanks to these reasons:

1) Australia has set aside A$9 million to fund cannabis research, as reported by the Australian Cannabis Industry Association.

2) The Australian government announced a few days ago it will allow exports of medicinal cannabis products. This is why, Peter Crock, Cann Group's CEO said that exports would immediately open the door to commercial viability. He also said that Cann Group would now go ahead with plans to plant 16,000 to 20,000 square metres of cannabis plants this year, up from the 600 square metres it currently has. Cann Group (CNGGF) has a research and cultivation centre in Melbourne that provides medication to Victorian children with epilepsy.

3) The Australian players which compete for our investment dollars have significantly underperformed over the last weeks relative to the Canadian and US-based peers, with many Australian companies still having Enterprise Value well under $100 million.

It's also noteworthy that most of the Australian marijuana firms have a secondary OTCBB listing, which makes trading for the American and Canadian investors easy.

After all, we see an opportunity in Australia given that the industry is still in its infancy over there.

However, we can't disclose more on the Australian marijuana stocks and we will share the details only with our subscribers in the Premium section of The Alpha Discoverer.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions expressed here are solely my opinion and should not be construed in any way, shape, or form as a formal investment recommendation. Value Digger does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. Investors are advised that the material contained herein should be used solely for informational purposes. Investors are reminded that before making any securities and/or derivatives transaction, you should perform your own due diligence. Investors should also consider consulting with their broker and/or a financial adviser before making any investment decisions.

Comments (5)
No. 1-5

9 millones de dolares para investigación en Australia. En el mejor foro de putas de españa hace poco incautaron casi una tonelada de marijuana, imaginense lo rentable que es este negocio. Aqui la noticia


Thanks VD, this is really a very interesting way to play marijuana trend by catching it early!

Value Digger
Value Digger


Investorandsurfer, CNGGF is not my cup of tea. We focus on other Australian marijuana stocks but I can't currently disclose more info about them because we keep them for our subscribers. Thank you.


VD, should I buy some CNGGF?