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Aphria Inc (CVE:APH) (OTCMKTS:APHQF) Poised For A Big Year

Aphria Inc (CVE:APH) (OTCMKTS:APHQF) Poised For A Big Year
Written by
Alex Carlson
Published on
March 3, 2017
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Aphria Inc (CVE:APH) (OTCMKTS:APHQF) has held up in 2017 better than other cannabis names. While across the sector we have seen profit taking, Aphria is just C$1 off the highs. This is a very positive sign and one that indicates that when the Green Rush 2.0 rally kicks in again, Aphria Inc is going to be a leader. Taking a closer look, it's easy to see why.Helping to drive Aphria's share price will be its listing on the Toronto Stock Exchange. Aphria has received conditional approval and will be graduating from the TSX Venture Exchange and list its common shares on the TSX. Aphria's listing on the TSX Venture Exchange will allow a whole new category of investors to participate in the Aphria story. We expect this listing to take place before May 3rd. CEO Vic Neufeld said:

"Graduating to the TSX represents yet another important milestone for Aphria as we continue our successful journey as one of Canada's leading cannabis companies. This achievement comes on the heels of many other important milestones we've reached: first public LP to report consecutive positive quarterly operating results. First public LP to report consecutive quarters with net profits. First public LP to license its cultivation intellectual property. Diversification with non-cultivation assets. Low cost producer status."

Last month, Aphria closed its most recent financing. The company sold 11,500,000 common shares at a price of C$5.00 per Share, for aggregate gross proceeds of C$57,500,000. The net proceeds of the Offering are expected to be used in connection with the Company's ongoing Part IV Expansion project and for strategic investments. It is currently anticipated that Part IV Expansion is expected to commence during the Company's third quarter.Aphria also acquired 2,222,000 common shares of Kalytera Therapeutics, Inc at a price of $0.45 per share, for an aggregate purchase price of $999,900. This transaction was part of Kalytera's private placement announced on January 23, 2017. Further, on February 21, 2017, the Company purchased an additional 1,450,000 common shares of Kalytera on the secondary market. Aphria now owns 6,172,000 common shares in Kalytera, representing approximately 4.8% of their issued and outstanding shares.The part IV expansion is a major undertaking for Aphria. The C$137 million project will increase Aphria's capacity under the Access to Cannabis for Medical Purposes Regulations (ACMPR) from 300,000 square feet to 1,000,000 square feet. In addition to the 1,000,000 greenhouse growing square feet, the Company's infrastructure will grow to over 250,000 square feet, necessary to service the expected 70,000 kilograms of eventual annualized harvests.

The project includes 700,000 square feet of Leamington standard, Dutch style greenhouses, 230,000 square feet of infrastructure, including new Level 9 vaults, automation for all of the greenhouses, processing areas, warehouse facilities, a 15 MW power and heat co-generation facility and security consistent with ACMPR standards. Aphria anticipates completion of Part IV within 12 months, Health Canada approvals within 4 months of completing the expansion, and first harvest within 4 months after Health Canada approval.

In January, we covered Aphria's Q2 results. The company reported 19% growth in quarterly revenues and delivered its fourth consecutive quarter of profitability. In Q2, Aphria reported C$945,678 in net income, or C$0.01 per share. Profits rose due to strong growth in the average selling price per kilogram (or kilogram equivalent) and very strong new patient registrations in the quarter. Revenue for the three months ended November 30, 2016 was C$5,226,589, representing a 19.5% increased over the prior quarter’s revenue of C$4,375,512. The gross margin for Q2 was 77.4%.

Tokyo Smoke is working with Aphria and will release four branded cannabis strains in the first quarter of 2017. Tokyo Smoke is an award-winning lifestyle brand that brings sophistication and design to the cannabis space. With immersive experiences and designer retail spaces with coffee, clothing and designer products, Tokyo Smoke is developing an international reputation as the go-to destination for luxurious, creative offerings within the industry.

Currently trading with a market cap of C$819 million, Aphria has become one of the most diversified cannabis companies in the world. Aphria has built quite an investment portfolio of cannabis names. This gives investors exposure across the entire cannabis spectrum. Aphria's list of investments includes Cannabo Medical (OTCMKTS:CAMDF), CannaRoyalty (OTCMKTS:CNNRF), Copperstate Farms, Green Acre Capital, Kalytera Therapeutics, MassRoots (OTCMKTS:MSRT), Resolve Digital Health, Scythian BioSciences, and Tetra Bio-Pharma (OTCMKTS:GRPOF). For an investor wanting to be in the cannabis sector, this diversification makes Aphria Inc a must-own stock.

We will be updating our subscribers as soon as we know more. For the latest updates on APH/APHQF, sign up below!

Disclosure: We have no position in APH/APHQF and have not been compensated for this article.

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