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Bet On OrganiGram Holdings Inc (OTCMKTS:OGRMF)

Bet On OrganiGram Holdings Inc (OTCMKTS:OGRMF)
Written by
Jim Bloom
Published on
January 20, 2018
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OrganiGram Holdings Inc (OTCMKTS:OGRMF) has lived up to our previous analysis and in the process, generated a lot of money to investors who followed our advice. With the upward momentum showing no signs of fading away, the stock could be in for a brilliant year if performance in recent months is anything to go by.Price Analysis OrganiGram Holdings share price has been rising at an impressive rate and is up by more than 40% for the past one month. Given the strength of the upward momentum, it goes without saying that, the stock is destined for more gains.Currently, the stock is trading at the $3.91 handle and faces immediate resistance at the $4.2 mark, above which it could rise to 52-week highs of $4.56. On the downside, it faces immediate support at the $3.5 mark, below which it could drop to the $3 a handle. OGRMF Daily ChartThe rise in value from $1.8 as of September to $3.91 is a testament that OrganiGram Holdings is doing all it can to give investors a reason to bet on its long-term prospects. We believe the stock is destined for more gains taking into consideration the recent pullback that seems to have presented investors a unique buying opportunity.Before we look at the catalyst likely to take the stock to new heights, it is important to first understand what OrganiGram Holdings does in its pursuit of value proposition. Business Overview OrganiGram Holdings bills itself as a medical marijuana company. Through its subsidiaries, it produces and sells medical marijuana products to individuals and physician across Canada. The company also offers marijuana plants, seeds, cuttings and cannabis oil.OrganiGram Holdings boast of an online store through which it sales its pipeline of products. In addition, it operates healing centers that offer products for treating post-traumatic stress disorders, chronic pain, and trauma therapy.Stock CatalystAs we disused in the previous analysis, OrganiGram Holdings has made important strides as it seeks to strategically position itself, to take advantage of the expected legalization of recreational cannabis use in Canada. Building a solid pipeline of products for targeting the medical marijuana market and the recreational market is top on the agenda.The cannabis-focused company is in the process of diversifying its product portfolio beyond just traditional dried cannabis. Even though demand for dried cannabis is usually high, profit margin on their sale is usually low. That said OrganiGram has set its sights on the extraction business as well as the sale of cannabis oils. The two boast of higher profit margins.The company has already raised $39.3 million through a bought deal offering. The funds are to be used to boost the company’s production capacity to 60,000kg of cannabis annually, from 20,000kg. OrganiGram is in the process of expanding its production facility at Moncton with the addition of 255,000 square feet of growing capacity. The expansion will bring the total square feet to 429,000.

“One of our key operating philosophies is to keep production costs low by centralizing operations. The simplicity of a single site is part of our focused approach to achieving the highest earning-per-gram in the industry. These production efficiencies will deliver tremendous shareholder value,” said CEO Greg Engel.

In addition, the company has entered into a memorandum of understanding with the government of Prince Edward Island for the distribution of some of its products to the adult use recreational market. The supply agreement builds on another memorandum of understanding that the company signed with the Government of New Brunswick for the supply of 5 million grams of cannabis a year. The deal is set to generate between more than $40 and $60 million for the company, a year.

“There is tremendous cannabis expertise here in the Maritimes," says Mr. Engel. "We have worked hard to assemble a local, world-class team of experts. We applaud PEI's recognition of our homegrown industry leadership and its commitment to building – and formalizing – positive and productive working relationships with regionally-based companies like OrganiGram.”

$100 Million Offering A further indication of growing investor confidence in the company’s growth prospects is the fact that Eight Capital an institutional investor together with a syndicate of underwriters have agreed to buy 100,000 worth of the company’s convertible debentures. The offering will generate $100 million in gross proceeds.OrganiGram has also agreed to grant the underwriters an overallotment option for the purchase of additional debentures. The transaction could generate an additional $15 million for the company.The company plans to use net proceeds from the offering to finance its global expansion strategy. It also plans to use the funds to steal market share from rivals as Canadian legal cannabis market continues to expand.Bottom LineThe $100 million financing provides the much-needed fuel that should allow the company to bring to fruition projects that have the potential cement its position in the marijuana business. OrganiGram should continue to rise higher as it brings to market new products to take advantage of emerging opportunities in Canada’s medical and recreational marijuana market.If you missed out on the initial rally, this could be the right time, to take part in a ride that is sure to take the stock to new heights.We will be updating our subscribers as soon as we know more. For the latest updates on ORMGF, sign up below!Disclosure: We have no position in OGRMF and have not been compensated for this article.

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