{"id":1093809,"date":"2019-01-09T15:28:02","date_gmt":"2019-01-09T15:28:02","guid":{"rendered":"https:\/\/oilandgas-investments.com\/?p=31066"},"modified":"2019-01-09T15:28:02","modified_gmt":"2019-01-09T15:28:02","slug":"canopy-rivers-riv-tsxv-is-a-marijuana-bank-but-with-huge-equity-exposure","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1093809","title":{"rendered":"Canopy Rivers (RIV-TSXv) Is A Marijuana Bank\u2013But With HUGE Equity Exposure"},"content":{"rendered":"

Canopy Rivers<\/strong> (RIV:TSXv; CNPOF:OTC)<\/strong><\/span>\u00a0is the marijuana stock that has what billions of dollars of institutional money are desperately searching for\u2026<\/p>\n

That is \u2013 RAPIDLY GROWING FREE CASH FLOW<\/span><\/em>!!!<\/p>\n

Predictable and growing cash flow is what the institutions want.\u00a0They have been searching for marijuana stocks with real business fundamentals and traditional valuations.<\/p>\n

By mid-2019, I think that every institution that wants to deploy capital into the marijuana sector will own Canopy Rivers.<\/strong><\/span><\/p>\n

Today this business is already generating a good and growing amount of free cash flow.\u00a0I’ll explain:<\/p>\n

Think of Canopy Rivers as the private merchant bank of Canopy Growth (WEED-TSX)<\/strong><\/span> and its CEO Bruce Linton \u2013 but they’re allowing YOU to buy into their best-in-class deal flow.<\/p>\n

With $5 billion cash, you can bet Canopy Growth sees a lot of companies they want to buy \u2013 all over the world.\u00a0But some entrepreneurs don’t want to sell outright \u2013 and that’s where Canopy Rivers comes in.\u00a0\u00a0Seeded by Canopy Growth, its management team and insiders, Canopy Rivers funds the best deal flow that Canopy Growth can’t<\/span><\/strong> buy.<\/p>\n

I think it’s a great business model \u2013 they create a small-cap merchant bank and fund it enough so they can do several deals at once \u2013 any one of which can \u2013 and have \u2013 created multi-baggers big enough to show up in the Net Asset Value (NAV) of “Rivers”.\u00a0 And they do no business in the US.<\/p>\n

Canopy Growth has a controlling voting interest in Rivers’ stock, to make sure nobody can steal the company.\u00a0 But they’ve set it up perfectly \u2013 there is almost no G&A in Rivers; everybody owns so much stock they don’t need the money.<\/p>\n

Rivers already has 12 investments \u2013 and they use debt, convertible debt, pref shares, regular equity and royalties in their model \u2013 in mostly private but some public companies.<\/p>\n

Think about this \u2013 just the investment income from their portfolio will be $15 million annualized at YE 2019, vs. cash G&A of just $7 million.\u00a0Then of course, as their investments grow and mature, the cash flow net to them should increase \u2013 and by a lot.\u00a0Here’s what my research shows annualized cash flow COULD look like in the coming 5 quarters:<\/p>\n

\"1\"<\/a><\/p>\n

That is not well understood by the market because quarterly financial filings come out months after cash flow is actually generated\u2026\u00a0so the institutions haven\u2019t picked up on the story.\u00a0Canopy Rivers just IPO\u2019d late Q3 18 and is just starting to filter into stock screens.<\/p>\n

By my calculations Canopy Rivers could see cash flow increase 6 to 10 times over the course of 2019.\u00a0 As that happens, more institutions will be comfortable enough to own the stock.<\/p>\n

That is why Canopy Rivers isn\u2019t a marijuana stock<\/span> that I own\u2026\u00a0it is why it is the only marijuana stock<\/span> that I own!\u00a0 It’s a (merchant) bank.\u00a0 Banks make money.<\/span>\u00a0 Banks with debt that can convert into lucrative equity in select companies.\u00a0 That’s what I mean by low-risk\/high-reward.<\/p>\n

Everyone knows that 2019 will be a huge year for the marijuana business.\u00a0Momentum is growing in
\nCanada and internationally.\u00a0The problem is that the institutions have no clear way to play it \u2013 the typical marijuana stock is all story and no substance.<\/p>\n

Canopy Rivers is different.\u00a0This is a business built on quality from top to bottom. This is a company that everyone can own\u2026\u00a0and everyone interested in the marijuana sector eventually will own.<\/p>\n

It ticks every box on my investment checklist:<\/p>\n

1.\u00a0\u00a0\u00a0\u00a0 Top notch management \u2013 CEO Bruce Linton and his team recognized as the BEST in the industry<\/p>\n

2.\u00a0\u00a0\u00a0\u00a0 Management is hugely incentivized by equity ownership not big salaries (Linton is paid just $1\/yr!)<\/p>\n

3.\u00a0\u00a0\u00a0\u00a0 No debt and a huge cash balance \u2013 great balance sheet ($40 million net cash)<\/p>\n

4.\u00a0\u00a0\u00a0\u00a0 Cash flow positive and growing fast \u2013 which could be up 6 to 10 times in 2019<\/p>\n

5.\u00a0\u00a0\u00a0\u00a0 Has a low valuation relative to its growth rate (I\u2019ll get to the specifics on that in a moment)<\/p>\n

This company is the ONE marijuana stock that gives investors everything they could ask for \u2013 including a realistic valuation!<\/p>\n

\nWhat Canopy Rivers Has In Store For 2019<\/strong>
\nCash Flow, Cash Flow and More Cash Flow!<\/strong><\/b><\/span><\/p>\n

There is a lot to the Canopy Rivers Story, but I\u2019m going to focus in on what I believe to be the main driver of growing cash flows \u2013 a joint venture called PharmHouse<\/em>.<\/span><\/p>\n

PharmHouse<\/em> combines the marijuana expertise of Canopy Rivers and a large, seasoned North American greenhouse operator.\u00a0The greenhouse partner is one of the world\u2019s leading commercial agriculture and produce companies.<\/span><\/p>\n

This partnership will be huge \u2013 it already has a long growth runway.<\/span><\/p>\n

PharmHouse<\/em> is retrofitting a massive, 1.3 million square foot greenhouse for cannabis production in Canada\u2026and there are already plans to build another one of comparable size.<\/span><\/p>\n

And then another, and another and another\u2026.<\/span><\/p>\n

This is a brand-new, top-of-the-line production facility built by North America\u2019s top greenhouse operator.\u00a0 Comparing this to other, older facilities that many peers are using to grow marijuana \u2013 this is like comparing an iPhone with a 1980s mobile phone that was the size of an encyclopedia.<\/span><\/p>\n

Production from this facility should be very profitable.\u00a0 The anticipated selling price in 2019 will be $3.75 per gram, and management has been rightly basing all decisions on profit margins of just $1 per gram \u2013 and even that shows PharmHouse\u2019s first facility generating $100 million of annualized free cash flow by the end of 2019.<\/span><\/p>\n

Half of that production belongs to Canopy Rivers \u2013 which equals a run-rate of $50 million in cash flow from just this one asset by Year End 2019.<\/span><\/p>\n

And PharmHouse is just one asset out of the 12 that Canopy Rivers has to offer!<\/span><\/p>\n

\n This Is The Lowest Risk Lottery Ticket<\/strong>
\nYou Will Ever Find In Marijuana<\/strong><\/b><\/span><\/p>\n

After PharmHouse, Canopy Rivers has 11 other marijuana projects underway.\u00a0That means that Canopy Rivers\u2019 shares come with free huge upside optionality\u2026\u00a0multi-bagger potential, lottery ticket winning type returns.<\/span><\/p>\n

Canopy Rivers is an incredibly advantaged merchant bank. As a publicly traded sub of Canopy Growth, “Rivers” gets best-in-the-world-deal-flow\u2026\u00a0Canopy Rivers gets to put seed capital into the best marijuana start-up companies at incredibly favorable terms.<\/span><\/p>\n

It’s like being in Silicon Valley and getting acccess to the seed financing of the Facebooks and Googles of the tech world.<\/em><\/span><\/p>\n

Canopy Rivers can see huge increases in its share price as its investments go from millions to tens of millions or hundreds of millions of dollars\u2026\u00a0those returns would be lost on the balance sheet of the $12 b-b-b-illion market cap of Canopy Growth \u2013 which is why the deals are pushed to Canopy Rivers.<\/span><\/p>\n

At least, that’s the way it’s supposed to work. It makes sense to me.\u00a0<\/span><\/p>\n

Canopy Growth CEO Bruce Linton is the acting CEO\/Chairman here, working for $1\/yr and a whack of stock.<\/span><\/p>\n

That means that you have\u2026<\/span>
\n 1.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The best and most experienced management team in the marijuana world<\/span>
\n 2.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Giving “Rivers” the best deal flow they come across<\/span>
\n 3.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 And they\u2019re completely aligned with shareholders<\/span><\/p>\n

Like I said, they already have a minimum $8 million in investment income for 2019 and easy-to-achieve milestones that pushes it to over $15 million \u2013 against cash G&A cost for the business of just over $7 million per year.\u00a0All 35 employees at Canopy Growth also have equity linked exposure which incentivizes them to push top investment opportunities to Canopy Rivers.<\/span>
\n \u00a0<\/span>
\n In 2019, Year One of this business model, I\u2019m really invested in Canopy Rivers because of the cash flow growth that PharmHouse could\/should crank out by year end\u2026 it could be as much as $50 million net cash flow to Canopy Rivers by year-end and growing from there.<\/span><\/p>\n

In a perfect world, Rivers is at an $84 million run rate this time next year \u2013 against an Enterprise Value today of some $520 million–about 6x EBITDA<\/span>.\u00a0<\/span><\/p>\n

Like every other management team in a public company, they must execute flawlessly for that valuation to make sense.\u00a0But it’s certainly one the institutions could understand \u2013 and buy.<\/span><\/p>\n

DISCLOSURE:\u00a0 I am long Canopy Rivers.<\/span><\/p>\n

Keith Schaefer<\/em><\/span><\/p>\n

\n



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Canopy Rivers (RIV:TSXv; CNPOF:OTC) is the marijuana stock that has what billions of dollars of institutional money are desperately searching for… That is – RAPIDLY GROWING FREE CASH FLOW!!! Predictable and growing cash flow is what the institutions want. They have been searching for marijuana stocks with real business fundamentals and traditional valuations. By mid-2019, I think […]<\/p>\n","protected":false},"author":19,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[528],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1093809"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1093809"}],"version-history":[{"count":71,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1093809\/revisions"}],"predecessor-version":[{"id":1103766,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1093809\/revisions\/1103766"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1093809"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1093809"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1093809"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}