Vancouver, British Columbia–(Newsfile Corp. – October 12, 2017) – Today’s buy recommendation comes from Fundamental Research Corp. Analyst Sid Rajeev gives Alliance Growers (CSE: ACG) a buy rating and a fair value estimate of $0.30 per share, a premium of 200% to the $0.10 closing price on September 27th, the day the report was issued. Alliance Growers Corp., along with it partner Botanical Research in Motion (B.R.I.M.), is planning to build a 40,000 square foot botany facility in British Columbia, Canada.
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B.R.I.M’s proprietary “Chibafreen Invitro Plant Production System” has the potential to mass-produce 3.5 million genetically superior cannabis plantlets a year, initially utilizing only 20,000 square feet. The company also expects that the botany centre will facilitate Testing Lab services, allowing Alliance to provide DNA tests for other growers in the cannabis space. Management have indicated that Alliance will initially have a 30% revenue earn-in to the botany centre at a cost of $3 million.
Analyst Sid Rajeev stated: “The botany centre will be constructed and ready to produce by the end of Q2 2018. However, as we conservatively estimate that the company’s ACMPR license will not be available until the following year, cannabis production will not commence until 2019. In the second half of 2018, we forecast Alliance will produce other plantlets with lower margins. We believe that production will double to 7 million plantlets per year once the facility is expanded. As Alliance expects there to be demand for 76 million plantlets per year, based on ACMPR licensed producers entering the market, we believe that Alliance’s market share (less than 10%) assumption is reasonable. Regarding CBD oils, management estimates an initial production capacity of 2,871liters per year. In our models, we assume production to begin at 359 liters in 2019, growing to 4,307 liters by 2024. We assume that future expansion of the production facility and joint ventures with other companies will allow CBD production capacity to increase.”
In addition to the cannabis botany centre project, Alliance also seeks to grow via strategic investments in licensed Canadian cannabis producers and is currently considering the following initiatives:
Alliance Growers’ management team and board of directors have significant legal and cannabis industry expertise, as demonstrated by their track records. Management owns 7.5% of the outstanding shares.
The shares are trading at $0.12, well below Fundamental’s fair value price of $0.30, and with 41.7 million shares outstanding, the company is capitalized at $5.0 million.
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