Post by
Bluechip2 on Nov 29, 2018 9:21am
The Good, The Bad, The Ugly
Lots of information and commentary to disseminate, here and elsewhere. The big picture sometimes can get lost with the emotion that comes from sitting on losses and seeing high revenue generation continally moving to the right, management continally changing milestone dates and strategies, and overall market sentiment on high negative alert. I still see a big orgasm in the SP, and execution in California is looking more promising and imminent as I watch the buildout.
The Good:
- updated forward multiples and chart comparisons with other US players is very compelling and the impact of Canadian slow rollout has had very little impact on those numbers. There looks to be very little risk left in this execution at Cathedral City.
- stock piling of extracted oils from biomass and trim although it foregoes some short term revenue, it will be transitioned to higher margin products and ensures a consistant supply when the brands hit the store shelves in January.
- the long development times for this advanced hydroponic facility is a reality not a misstep. Follow on facilities from other companies such as High Hampton will have the same development timelines and they haven't even broken ground yet, so huge first mover advantage.
-lack of clean product in Q3 for extraction ramp up points towards very limited supply and problems for at least a couple of years for other California LP's, retailers, and distributors. It will also give Sunniva products and brands prominant shelf space for the foreseeable future.
- completing the entire facility in Q1 and onboarding 100,000 plant-lings points to a dramatic buildup in revenue for the 2nd and 3rd quarters as opposed to piece mealing the bay development and having incremental volume and revenue growth.
- the Canadian development will be slow and methodical, aligning capacity with customer demand at the NHS clinics, providing high margins for long term customers who will rely on the NHS doctors to provide evolving prescriptions (Sunniva products) as research evolves. Margins will be extremely high, likely the highest in Canada without the rec dilution.
The Bad:
-there is no road to profitability in Canada in 2019 and a select few will survive by gaining additional traction from international markets. The highly regulated commodity market, with restricted vertical integration rules, ensures that the recreational market in Canada is a marginal business opportunity with overcrowded supply markets for the time being.
- Canopy supply deal looks to be off the table which was the derisking aspect to help pay for the Okanagan buildout at large scale. Canadian market is a mess right now and even if Sunniva was to get financing for the large scale facility, the investment would not be risk adverse.
- with high revenue moving to the right some more, trader volume will be delayed and SP will stagnate a little longer unless there is positive news on the trade front with China. Management is more focused on development then catering to investor sentiment, this combined with continually having to adapt to changing markets has left some bitterness which will be pounced on.
The Ugly:
Having to develop a business in such a negative, myopic, impatient investor environment. Due to federal illegality, the majority of investors are sort term, near sighted and emotional which is just ugly on virtually every forum I read. Good luck to all Sunniva investors, these guys have a long term survival strategy with the flexibility to adapt as they have, we will be rewarded heavily in 2019.
Comment by
RoughStart on Nov 29, 2018 9:35am
Well written. One question for you. What do you make of the vendor financing for the 2nd and third phases for BC? Do you think this hints at canopy rivers or auxly type? Or do you think canopy itself would help finance the building for a share of the supply still?
Comment by
market101a on Nov 29, 2018 12:00pm
Keep selling those shares , happy to buy back in at $4