NetworkNewsWire Editorial Coverage: A new report out from Hexa Research projects that the domestic market for medical marijuana is slated to grow over 250 percent by 2024 to reach a new worth of nearly $20 billion (1). Globally, the market is estimated as reaching some $55.8 billion by 2025. Players in the space are banking on this incredible growth, executing their individual strategies to take part in the vast opportunities. SinglePoint, Inc. (SING) (SING Profile) employs a diversified acquisition-based strategy and is moving toward select joint-ventures to further enhance revenue growth potential as an increasingly cannabis-focused holding company. The goal of any company is growing value, and whether we are talking about up and coming growers like Supreme Pharmaceuticals, Inc. (SPRWF), cannabinoid medicine developers such as Emerald Health Therapeutics, Inc. (EMH:CA), suppliers of proprietary cultivation systems like Surna, Inc. (SRNA), or a holding company like General Cannabis Corp. (CANN), revenue growth and expansion are common objectives.
Analysis of publicly available 2016 data by Marijuana Business Daily offers investors clear insight into why companies are looking to gobble up broader footings in this market. One key data point shows that over 64 percent of medical marijuana patients were qualified under chronic or severe pain conditions. Pharmaceutical pain management is a $32.3 billion market in and of itself and is slated to grow at an 8.1 percent CAGR through 2022. Given increased attention to the opioid epidemic in the U.S. and a resounding chorus of voices citing intriguing data such as the 23 percent decrease in hospitalization rates for opioid abuse in states that legalized medical marijuana, we can see clearly why companies want to get their hands on as much of this industry as they can (and fast).
It’s no wonder established sector operators (and even new entrants), many of whom are locked into a single revenue-generating vector, are thinking about intelligently branching out the way SinglePoint, Inc. (SING) has over the past year. The real appeal of such a diversified acquisition strategy has the potential to not only accelerate revenue growth by establishing a more robust set of revenue streams, but to gain a more dominant and solid overall footing within the industry. Why just be an isolated cultivator, equipment supplier, or cannabis medicines developer when one can put together a series of proven, profitable entities of this type and become a real powerhouse operation in this seemingly unstoppable and rapidly growing industry?
Take a look at how SinglePoint has evolved so quickly, going from a core emphasis on advanced payment technologies and full-service mobile technologies leveraging the company’s SingleSeed subsidiary, to a full-fledged holding company specializing in acquiring small to mid-sized companies, and thus judiciously layering up profitable, parallel interests in the ultra-hot cannabis business. Ever since the acquisition of a strategic stake in revolutionary vape pen filling/sealing system developer and B2C purveyor Jacksam Corp. (dba Convectium) in March (http://nnw.fm/3YFg6), SinglePoint has been on a real tear. Two months later, SinglePoint snapped up 90 percent of California-based cultivation hardware supplier and cannabis consulting outfit Discount Indoor Garden Supply (“DIGS”) Hydro (http://nnw.fm/oh7ZW), and more recently acquired a 51 percent stake in Arizona-based medical marijuana distribution outfit Dr. FeelGood (http://nnw.fm/5rT6R). SinglePoint CEO Greg Lambrecht, noted in a recent interview on MoneyTV with Donald Baillargeon how sage use of its public vehicle has allowed the company to rapidly piece together a much more stable footing in the cannabis industry that already delivered a substantial increase in revenues. The acquisition of DIGS Hydro and Convectium, according to Lambrecht, has increased revenues a whopping 378 times compared to Q1 2017.
For a well-positioned operation like SinglePoint, this is music to investors’ ears and Lambrecht also recently pointed out that the company is looking to do more select joint-ventures as well, in addition to further acquisitions that will bring in yet more revenue streams. Looking at Convectium’s revolutionary 710Shark (produced under the BlackoutX brand), which can fill and pack over 100 cartridges for vape pens in 30 seconds at around half the price per machine of the industry standard, it’s easy to understand how Convectium is able to project a 150 percent increase in sales this year to some $3.5 million. This easy-to-use beauty is the only known machine on the market today that can fill cartridges or disposables on this scale for wholesale distribution and the machine utilizes a state-of-the-art dual-heat injection technology that can fill many different types of disposables, using even the thickest of oils. The 710Shark even comes with a 1 horsepower California Air Tools 5.5 gallon, ultra-quiet, oil-free air compressor. The 710 Seal Machine is the other end of the BlackoutX “Fill Seal Sell” System and collectively represents the first such end-to-end system on the market, allowing for easy production of childproof blister packs from loaded cartridges/disposables. Convectium also provides a suite of B2C offerings, which SinglePoint will offer through the SingleSeed platform.
DIGS Hydro is already quite well established in retail via an extensive online catalog featuring a wide variety of growing supplies, as well as equipment ranging from HVAC to complete surveillance systems that are tailored to secure a particular grow op. Furthermore, the company provides a number of mission-critical design, construction and maintenance services, covering indoor, greenhouse, and aquaponic setups. This acquisition also grants SinglePoint access to some talented new personnel, such as DIGS Hydro’s top man Carey Haas, who has over 25 years in the industry and will be instrumental to SinglePoint’s decision-making process moving forward on the cannabis side of the business. Recent estimates for the California cannabis market are very promising, with New Frontier’s analysis recently noted in the LA Times projecting 12 percent CAGR over the next eight years to $6.6 billion. This could make the DIGS Hydro acquisition a big feather in SinglePoint’s cap, particularly as the rest of its diversified acquisition strategy plays out.
Dr. FeelGood already has an established presence on the widely used cannabis locator site Weedmaps, with a 4.9 out of 5 star rating, and a recent announcement indicates that the company is set to release an app to compete directly with the likes of Weedmaps in just three months’ time. This proprietary mobile application will not only enhance the user experience, it will enable licensing of the technology to other distribution entities in the U.S. once the app is complete. The new app will add substantial weight to Dr. FeelGood’s overall presence, which also consists of a wide variety of B2B and B2C distributed products. By leveraging SinglePoint’s existing location-based delivery technology, the app, which has been on the drawing board at Dr. FeelGood for some time now, will take full advantage of additional features like a directory and ordering system. In this way, the app will offer consumers a souped-up and feature-rich version of already successful, similar offerings in the space.
This diversified approach by SinglePoint to the cannabis sector is something for investors to take note of in comparison with other operators in the space today, especially considering how investor-accessible SING’s share price currently is at less than a dime per share. As the pot market continues to mature, we will most likely see an increased drive towards diversification by established sector operators and new entrants alike, with other companies seeking to emulate the roll-up strategy of companies like SinglePoint. This rising trend was mapped out nicely by a recent article in Marijuana Business Daily, highlighting the substantial uptick of M&A activity in the sector. In particular, the Viridian “Deal Tracker” data shows 126 such deals were executed from January 2016 to March 2017 (most likely a conservative estimate).
Supreme Pharmaceuticals, Inc. (SPRWF) has pulled back a bit to around $1.02 from highs of early 2017 when it was $1.41 and charging strong, coming off of a banner 2016 that saw completion of the company’s first sale of cannabis genetics to another Canadian Licensed Producer, as well as some $70 million in private placements. This was all subsequent to reception of ACMPR (Access to Cannabis for Medical Purposes Regulations) permission to sell product by the company’s wholly-owned 7ACRES subsidiary in June this year and an uplisting from CSE to the TSX.V exchange. Supreme is quickly realizing its stated mission of producing consistently high-quality cannabis in large quantities for the commercial market and even with a 342,000-square-foot production space at the company’s hybrid greenhouse facility, many investors have not heard the last of this up-and-coming cultivator when it comes to sales.
Surna, Inc. (SRNA) recently initiated a comprehensive new branding strategy, including the launch of a new website, in an effort in to draw greater attention to the company’s emergence as a go-to solutions provider for many in the cultivation industry’ particularly for grow ops looking to optimize energy, water usage, and ultimately crop yields. Surna prides itself on providing cutting-edge industrial technology and products for commercial indoor cannabis cultivators. The company’s user-friendly new site is tailored to Surna’s key demographics, such as engineers and contractors tasked with configuring indoor grow ops in the U.S. and Canada, and it is set up in such a way as to facilitate partnering opportunities with those key demos. The company notes that demand for its systems comes primarily from the construction of new cultivation facilities in North America, and said it anticipates more revenue opportunities as more cultivation facilities become licensed amid regulatory changes. Surna reported $1.742 million in second-quarter revenues, and recently landed $1.3 million contract that is currently in the engineering phase.
Emerald Health Therapeutics, Inc. (EMH:CA) is a serious contender in cannabinoid formulations for medicinal and/or recreational use. Emerald Health has one of the top batches of cannabis genetics in the sector today under the company’s thumb, as well as advanced R&D and extraction technology at its disposal. The last of which is a key point to take note of, given that cannabis oils have seen exceptional increases in demand, with Health Canada data alone showing an 871 percent increase in the amount sold to Canadian clients from Q4 2016 to Q4 2017 (Jan 1 – March 31). Emerald Health Therapeutics announced back in June that the company is laser-focused on heading towards pharmaceutical formulations and clinical studies, having established an Advisory Board containing several highly reputable doctors and professors, who will provide the much-needed strategic guidance for this process.
General Cannabis Corp. (CANN) is a bit more like SinglePoint in its approach to the sector and is designed as a synergistic holding company that provides a one-stop-shop for finding the best cannabis industry service providers. With competencies spanning real estate, consulting, security, financing and infrastructure product distribution, General Cannabis is well on its way to becoming an industry institution. Furthermore, General Cannabis has organized its architecture of subsidiaries to take full advantage of symbiotic relationships between them. Next Big Crop, which represents the company’s operations segment, offers highly professional consulting on cultivation, processing and sales of cannabis via a full-cycle platform replete with hands-on experience rendered techniques. Iron Protection Group is CANN’s security subsidiary and has had its capabilities prominently featured in The New York Times; capabilities only further enhanced by the recent acquisition of Mile High Protection Services as the company seeks to expand an already sizeable position in Colorado’s thriving cannabis market. Chiefton Supply Co. is the apparel wing of the operation and, together with CANN’s brand development and design subsidiary, Chiefton Design, provides a rich and compelling marketing presence for the company. Q2 results for CANN showed revenue up 19 percent year over year, driven in large part by the success of the Next Big Crop subsidiary, which posted a 403 percent increase in revenues over the aforementioned period.
The broader cannabis industry is budding with potential, and the lineup of innovators in this global market provides investors a diverse array of investment opportunities. For SinglePoint, a diversified acquisition strategy puts the company a unique position to explore and acquire various targets that keep the company among the leading cannabis plays as it continues to grow its valuation.
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