I am quite certain you have heard about the Big Cannabis companies. Who hasn’t?
Canopy, Aurora, and Tilray all made enormous gains and their early investors very rich.
After a massive consolidation in 2019, we believe the Second Cannabis Wave is getting ready to be unleashed upon the market. But what will be the best way to play this?
Sure, there will be money to be made on the big stocks, but the serious money is all to be had betting on the high-quality smaller stocks.
Step forward Halo Labs!
This vibrant business has already established itself in a dominant position as one of the leading companies in California and Oregon, two of the United States’ largest cannabis markets.
Only a few days ago Halo smashed all expectations, posting record profit.
And there is much more to come.
Halo is about to undergo a transformation that could see it become the biggest cannabis company in the world. Bigger than any other company and its market cap was only $46.8 million, as of 11 November 2019.
If you read nothing else this week, read what I am about to share with you about Halo….
The birth of the global cannabis industry
As debt-laden governments around the world desperately seek out new revenue streams, the global cannabis industry represents one of the last remaining sources of untapped wealth.
To give an idea of how immense an opportunity this presents, consider THE HISTORICAL PRECEDENT.
On December 1933 President Franklin D. Roosevelt brought Prohibition to an end. And opened the financial floodgates.
In the 12 months that followed, the Federal Government reaped a massive financial windfall, collecting more than $258 million in alcohol-related sales taxes – or $5 billion in modern money.
Eighty-five years and trillions of dollars later, we could be on the cusp of an even greater economic marvel…
… the global legalization of cannabis.
The Next Cannabis Rally will be the long-term trend
Unlike Prohibition, which only affected the United States, the legalization of cannabis is a WORLDWIDE PHENOMENON.
What we are witnessing today is the birth of a new regulated, legitimate GLOBAL industry.
And this global industry is only in its infancy.
According to Grand View Research, the international cannabis industry was worth $11.9 billion in 2018. It is on course to grow in size SIX times over the next five years, with a projected value of $66.3 billion by the end of 2025.
The outlook is superb.
Big Pharma certainly smells the opportunity. Medical cannabis is finally undergoing serious clinical research. In the United States alone, there are already 3.1 million registered medical marijuana patients, according to the Marijuana Policy Project.
This number is set to grow exponentially as the industry matures.
Meanwhile, recreational use is expected to remain strong, with the future of the cannabis market being the supply of consistent, high-quality product for the sophisticated user.
Although the bursting of the cannabis bubble has hit the sector hard in 2019, as we enter 2020 there will be big winners that will thrive thanks to this cyclical process of creative destruction.
Halo Labs is vying to become one of the lead runners in the field.
Halo Labs’ (OTCQX:AGEEF) (NEO:HALO) proven track record of fantastic high growth
Halo has perfectly placed itself to surf the crest of the wave throughout the next great Cannabis Rally.
The company has positioned itself as a major player in the budding cannabis sector with its focus on quality, longevity, and exceptional growth.
Halo’s directors have proven track records in building companies worth hundreds of millions of dollars and have continued their run of tremendous success into this, their latest venture.
Since its formation in 2016, Halo has sold over 4 million grams of cannabis oil and concentrates. The firm now comfortably sells 200,000 grams a month and is one of the leading wholesale producers and suppliers of extracted cannabis products in California and Oregon.
In the first nine months of 2019, Halo generated $25.4 million in revenue, an enormous 223% increase on the same period in 2018.
Gross profit rose an incredible TEN times year-on-year to $6.6 million, and at 30 September 2019 Halo had working capital in excess of $19.1 million.
Yet, this is just the beginning of the story. The next few chapters promise to be even more thrilling.
The three critical ingredients to Halo’s (OTCQX:AGEEF) (NEO:HALO) formula for success
Under CEO Kiran Sidhu’s leadership, Halo has developed a three-pronged strategy in its bid to become a dominant force in the global cannabis industry:
- By acquiring Bophelo Biosciences & Wellness (PTY) Ltd. (“Bophelo”) in Lesotho, Africa, and its 205-hectare (507 acres) farm, Halo will become one of the continent’s largest cannabis cultivators, growing thousands of kilograms of high-quality product to sell to international markets each year.
- By being one of the first cannabis companies to treat the anticipated vaping ban as permanent, Halo will build on its existing foundation, transforming its product lines to focus intentionally on quality oils & concentrates through licensing and white-labelling opportunities.
- By leveraging its leading position in the US domestic market and strong balance sheet, Halo is seizing the opportunity presented by the bursting of the first cannabis bubble to snap up strategic, cash-generative assets at distressed prices.
This ambitious approach has already delivered significant financial rewards to Halo, but in 2020 things could get REALLY exciting.
Is Halo (OTCQX:AGEEF) (NEO:HALO) a Billion Dollar cannabis grower in the making?
Halo has proven beyond doubt its pedigree as a cultivator and producer of high-quality cannabis. In Oregon, at its 6-acre (2.4 hectares) East Evans Creek Farm, the company has just produced a record marijuana harvest of 6,800kg of dry product.
East Evans Creek before & after shot (SOURCE: HALO LABS INC.)
Moving forward, Halo’s board believes the annual yield at East Evans Creek will result in a minimum of 6,800kg of cannabis per acre (or 2,805kg per hectare).
As impressive as these numbers are, the real excitement is coming from the kingdom of Lesotho in southern Africa.
Here, Halo is on the verge of acquiring Bophelo Biosciences and its 205-hectare (507 acres) cannabis farm in an all-paper transaction, for 46 million shares.
The deal is truly visionary. Not only will Halo preserve its cash position, but it will also introduce an EXTREMELY cash-generative asset to its business.
Only when you get a feel for the size of the Bophelo site compared to East Evans Creek can you truly begin to appreciate what Halo’s team of expert cultivators could achieve there.
East Evans Creek (red) compared to Bophelo Farm (green) (SOURCE: HALO LABS INC)
And it gets better.
Thanks to Lesotho’s geographical location, its climate, and its mountainous terrain, it is possible that the Bophelo Farm could have as many as THREE growing seasons a year. Yes, that’s right; THREE harvests a year.
The potential numbers are truly staggering.
In the 18 months following the completion of the Bophelo acquisition, it is conceivable that Halo will increase its revenue by as much as $30 million from successful harvests at this farm, as the project is built out in phases.
This assumes the company can produce the 74,800kg of dry product it initially expects once the first 11 acres of greenhouses at Bophelo are fully operational. The first growing season has already begun, with the maiden harvest anticipated in April 2020.
Crucially, getting to this point will not cost Halo anything more, as the company expects to secure a senior lending facility to pay for the modernization of the farm.
From a shareholder’s perspective, this is an ideal situation, and if Halo’s team can replicate its success in Oregon at Bophelo then the company has a genuine shot at becoming a MULTIBILLION-revenue firm.
Here’s the math to support this view:
- Multiplying an assumed 2,805kg of cannabis-yield-per-acre by Bophelo’s 507 acres gives an implicit yield of 575,025kg of cannabis.
- If we then assume a long-term average sales price of $2.50 per gram, this sets a potential revenue target of $1.44 billion from high-quality cannabis grown at Bophelo FROM A SINGLE HARVEST.
That is not a misprint.
The growing capacity at Bophelo is stratospheric.
Remember, Bophelo could have as many as THREE growing seasons a year.
With its cannabis-friendly regulatory environment and established legal system, Lesotho is one of the crucial gateway exporters to all international markets, from Europe and Israel to the United States.
Bophelo already has in place each of the necessary permits and licenses for the manufacture, supply, export and transportation of medical cannabis and medical cannabis products from the country.
What’s more, Lesotho also has in place duty-free trade agreements with virtually all the western countries that are in the process of legalizing cannabis.
Oh, and did I mention that the actual sales price per gram of cannabis is $9…
By now you will already be thinking of ways to fill your boots with Halo stock.
But let’s not get carried away just yet. Didn’t the vaping ban just push the cannabis market off a cliff?
Well. No. The vaping ban is the best thing that could happen to the legitimate cannabis market.
Switching our attention back to the US domestic market and much has been made of the expected vaping ban.
While this has undoubtedly caused short-term disruption to many cannabis operators, it also presents a huge opportunity, which Halo has welcomed with open arms.
The war on vaping is reminiscent of the battle against Big Tobacco in the 1990s, and rightfully so. No one wants to see high school students become addicted to nicotine or suffer vaping-related lung injuries.
However, the cannabis market isn’t the vaping market.
The cannabis market is far more extensive than that. The medicinal cannabis market, alone, is already a multibillion-dollar industry.
Those cannabis companies that have built their business models on supplying vaping products have made a catastrophic strategic error.
Halo, by contrast, has exercised great foresight in building a far more resilient model.
The company was well ahead of the game in recognizing that the vaping ban would most likely be permanent. Many experts now agree.
While Halo is determined to become an international leader in the cannabis cultivation market, clearly signalled by the Bophelo acquisition, right now the company has transitioned its product line to focus exclusively on its expansive suite of cannabis concentrates.
To this end, Halo has adopted a “white label” and licensing strategy to create new product lines for the increasing number of US states where cannabis products are becoming legal.
Examples of Halo Labs product range (SOURCE: HALO LABS INC.)
Halo has high expectations for this shift in strategic focus and is on course to deliver full-year revenues in excess of $35 million in 2019.
Growth through acquisition in a buyers’ market
In parallel to its shift in product focus, Halo has also embarked on an acquisition spree, targeting prized assets at distressed prices.
The bursting of the first cannabis bubble has created a buyers’ nirvana for those firms that can afford to take advantage of it.
Halo can and now is.
With its strong balance sheet, underpinned by more than $19 million in working capital, Halo is a hungry predator stalking significantly undervalued assets.
Halo’s directors have identified a pipeline of high-quality takeover targets, which the company intends to purchase with stock.
By using its paper so smartly at this stage in the cycle, Halo intends to boost its cash position substantially. Not only will the company preserve its existing balance sheet strength, but also it will add to it through the introduction of exciting cash-generative, strategic opportunities.
The short-term gains will contribute immediately to Halo’s bottom line, but the real returns will come when the cannabis market turns.
And it will turn.
For now, it is all about building a mighty position.
The SEVEN reasons why Halo Labs (OTCQX:AGEEF) (NEO:HALO) is an outstanding buy
By now you are probably feeling compelled to log straight into your broker account to pick up some Halo shares.
After all, at 19¢ a share, Halo’s market cap is only $46.8 million, as of 11 November 2019.
Let’s recap on why owning Halo makes sense.
Here are the seven reasons why Halo Labs is an outstanding buy:
- High growth credentials proven in action with $25.4 million in sales through nine months
Since it was founded in 2016, Halo has sold more than 4 million grams of cannabis oil and concentrates. It is now selling in excess of 200,000 grams a month.
In the first nine months of 2019, Halo generated $25.4 million in revenue, an enormous 223% increase from the same period in 2018. Gross profit rose an incredible TEN times year-on-year to $6.6 million. And there is still a full quarter to go…
- A very strong balance sheet
On 30 September 2019 Halo had working capital of $19.1 million.
Remember, at 19¢ a share Halo’s market cap is only $46.8 million. This gives the company an enterprise value of less than $27.7 million. The upside potential from the existing business alone is crystal clear.
- A hugely successful management team
The members of Halo’s board have been tremendously successful throughout theirs individual careers.
Between them, the directors have built companies worth hundreds of millions of dollars. Today they are applying these same talents to the growth of Halo.
- Great vision in foreseeing the vaping ban and repositioning its product line
Perhaps in hindsight, the vaping ban was predictable. Maybe it wasn’t.
Whatever the case, Halo’s leadership exhibited great vision in foreseeing this and great skill in repositioning its product line to adjust. Throughout 2020, expect to see this make a massive contribution to Halo’s bottom line.
- Accelerating growth through acquisition
The 2019 bursting of the first cannabis bubble has created a buyer’s paradise for those companies that can afford to seize the initiative.
Thanks to its financial muscle, Halo can and is. The company has assumed the role of a hungry predator in its hunt for undervalued assets. Expect to see much more action on this front in the coming weeks and months.
- Expert cannabis cultivators
As demonstrated by the bountiful cannabis harvests at Halo’s 6-acre East Evans Creek Farm, which most recently produced a record 6,800kg of dry product, Halo has assembled a troop of expert cannabis cultivators.
As the cannabis market matures and the focus switches to quality of production, Halo will have a unique edge in fulfilling its deeply held ambition to become a leading player in the international cannabis market.
- Bophelo and the Billion Dollar revenue potential
All of the above steers us in one direction.
Halo Labs has set its sights on becoming a Billion Dollar player in the global cannabis market.
As clearly demonstrated, Halo has laid the strongest of foundations to build upon. The acquisition of Bophelo in Lesotho and its 205-hectare cannabis farm could prove to be the keystone of this strategy.
With its cannabis-friendly environment and supportive regulatory system, Lesotho acts as the perfect gateway to supplying the international cannabis market.
The Bophelo acquisition could potentially add $30 million to Halo’s revenue in the first 18 months alone and beyond that, many Billions of Dollars over the coming decades.
Which leads us all to one final point.
The long-term trend for the global cannabis market is up.
Will you be on the right side of it?
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