RE:RE:RE:RE:Was at the Edmonton Facility Recentlycornwallis wrote: One other thing I'm curious about is the 13,000 kg/year maximum production you'd calculated in your first post.
RQB's web site and investor presentation give a value of 7,000 kg/year for Edmonton.
I'd just like to better understand the discrepancy, even with 13,000 kg/year being a theoretical upper bound rather than an expected production output.
That is absolutely correct. RQB knows what they *can* and *intend* to grow, I was merely providing a theoretical maximum of what they *could* grow. If they came out next month and said "We plan on harvesting 34,000kg from our Edmonton facility", well, I'd have some pretty serious questions/doubts. Saying they're going to grow 7,000kg, about half the facilities theoretical max, should provide some reassurances they're being cautious rather than providing rosy-overestimations.
cornwallis wrote: I assume that the 29 g/plant dried is a value that they'd provided to you during the tour?
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Nope. They were only beginning the harvest while we were there (prepping to remove plants from the Orbital Gardens) so they wouldn't even have had actual dried flower values (and that would almost certainly constitute a material disclosure given the impact of what that number could represent). I got that number from their 2019 Q2 Financials, page 27.
cornwallis wrote: I'm also assuming RQB is being conservative with their value.
As do I, but in this case I'm only investing based on what RQB is committing to producing, or I can actually positively account for. I think it's a worthwhile investment at 7,000kg of production in Edmonton in 2019. That's still $38.5M at their *lowest* wholesale value ($5.50/g), just from Edmonton alone (keep in mind, Markham is producing as well). Their projected EBITA margin is 72.7%, so do the math on earnings per share from there. Even at 4x earnings, you can see the share price seems pretty low. I'd say look to their Q3 or Q4 reports for any lingering doubt to start evaporating.
cornwallis wrote: Maybe the RQB value reflects only some of the rooms being usable so far, and the cautious/slower ramp up, like you've described?
That requires a level of speculation I am completely uncomfortable with. I don't know the plans/calculations/next steps for RQB. Think of what I'm saying here as describing a parking lot. I can count the number of spaces drawn on the ground, but I have no idea how many cars are going to park there in what period of time. So I can say "There are 100 spots and they charge $1 an hour each, so the max they can make in a day from that lot right now is $2,400". Maybe they install lifts so they get two cars in one spot and double their revenue. Maybe they put up an inflatable bouncy castle over half the spots and can only make half their revenue. Only RQB knows their capability and plans; only they can speculate/project their revenue.
cornwallis wrote: That may set more realistic expectations for the first year, perhaps with an actual value closer to the one you calculate being attained once production is fully going
This is what I'm looking for. I want to see what their harvest numbers are with all rooms licensed, all pods fully-populated, and all clusters/rooms cycling every 8-9 weeks (including harvest, sterilization, and load-in time). Maybe the plants only yield 17g each and we only get 7,800kg/year, maybe they start getting 35g/plant and we see unbelievable numbers out of Edmonton like 16,000kg/year. I have no idea what the future holds, but that's what speculative investing is all about.
Maybe I buy a zodiak in 2020, but then again, maybe I buy a yacht ;)