Judging by the bull action in SIGO’s stock price, it’s time to take a closer look at Sunset Island Group Inc (OTCMKTS:SIGO). Our readers will remember well our coverage on this medical cannabis operator, as our opinion has always been positive. We appreciate this name not only because it has been reducing its shares. It was noted very recently that the company is planning for additional square footage for cultivation.
Photo taken from https://www.sunsetislandgroup.com - Sunset Island Group Inc OTCMKTS:SIGO
7 months chart for SIGO 2-month chart for SIGO
What's moving the share price again?
One of the most interesting information received by the market is about the growth experienced by SIGO. On August 24, 2017, it was reported to the market that the management is planning to expand to an already predetermined minimum of 152K square feet. Furthermore, it was also said that "swinging for the fences and expanding quickly in phases to a total of 750,000K square feet " was also an option. In our opinion, only mentioning "750,000K square feet" made the market react. SIGO's share price increased from $0.7 to $0.8 in only a few trading sessions.
How is the company going to finance the future growth?
We believe that the fact that SIGO will not be using toxic debt but will be only executing equity transactions interested many market participants.
"What we are telling you as clearly as possible is we have a unique and effective way to raise funds in place, a plan to keep the outstanding share count to a minimum, a way to create explosive revenue growth without the creation of any substantial debt, much less toxic debt and at the same time doing so without the payment of any salaries to officers of the company, only monthly dividends; the exact same dividends received by our shareholders." Source
In September, more news about the expansion of square footage was put out. A new 6,000 square feet area was being built, and the setup and clones would be fully planted and ready for harvest in approximately 90 days. Also, it was confirmed in a new press release that the new planned minimum for SIGO is 152K square feet. We believe that this information made the market react again.
Furthermore, very interesting facts about how management is running the company were noted. The most significant was that the officers are not taking salaries. They are being compensated with dividends. This information should have been appreciated by market participants. It means that the management only earns money if SIGO reports positive net income or if the share price increases.
It was also noted that shareholders were invited to see the two cannabis grow facilities in the country on September 16, 2017. The readers who were able to attend the meeting, please write some comments at the bottom of this article.
On September 20, 2017, we could also read that a new agreement to acquire an additional 32,000 square feet of cannabis grow space had been signed. The contract includes a 2 ½ year lease with two 5-year renewal options. Additionally, it was also noted that the company counts with a team of a little over 20 experienced people, and more hiring can be expected. This fact is very positive. Having more personnel is usually followed by more production and more revenues. We will need to be very alert for the next quarterly earnings. They may surprise.
On the top of it, regarding the expected production and the profits, the following significant words were said:
"The obvious solution to increasing the number of pounds of cannabis produced each year is more space, but effective utilization of the space that you already have is also important. With that in mind, effective immediately we are retrofitting our original 10,000 square feet of grow space at a cost of approximately $75,000. The return on this investment will be considerable and we predict we will be able to increase our yield by 50%.” Source
New Product Line
In October 2017, we could get to know some information about the type of products that SIGO intends to sell. They will be called "Pre-Rolls," and the company was said to commence production in October. According to the press release, the margins are expected to be "extremely high" on this new product, and SIGO owns equipment to produce pre-rolls in the tens of thousands on a monthly basis. As we said before, we will need to revise the revenues that will be reported in 2018. We believe that many in the market will be looking for those financial figures to confirm the company growth.
The company has received its cultivation license
Undoubtedly, the most interesting announcement was made in January. SIGO officially received the cultivation license for adult and medicinal products. Additionally, it was noted that the manufacturing license and the distribution permits were expected to be received in the following couple of weeks. The announcement of the cultivation license created a share price spike. Thus, we are also expecting good market reactions when SIGO receives its manufacturing license and the distribution permit.
We believe that the approval from regulators could not have happened better than this time. The state of California, in which the company is headquartered, recently approved the use of recreational marijuana. As a result, it is expected that licensed marijuana growers and sellers like SIGO will profit.
Conclusion
Currently trading with a market cap of $7.4 million, SIGO is an exciting story among small caps. Regarding the financials, we believe that many in the market would become much interested in SIGO if the management publishes its most recent financial statements.
To sum up, be ready to assess more news from this company; it is what's moving the share price.
Be sure to check out our coverage on SIGO!We will be updating our subscribers as soon as we know more. For the latest updates on SIGO, sign up below!Disclosure: We have no position in SIGO and have not been compensated for this article.Image courtesy of Martijn via Flickr
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