Potential Catalysts for Cronos Group
- Improvement Of / Growth In Peace Naturals. Since acquiring control, the company has made many operational changes (increased power and growing capacity, optimized production methodologies and facility layout, overhauled retail pricing strategy, established new patient enrollment programs). We look forward to seeing the start of these benefits with the release of the company’s Q4/FY16 results.
- Further Details / Plans Re Indigenous Roots JV. The partnership will start with Cronos’ JV partners constructing and financing the operation. We look forward to receiving more information regarding the plans for this JV in the near-term.
- Further Details Regarding International Opportunities/Shipments.
- Hydropothecary and ABcann to Go Public. We understand that Hydropothecary and ABcann are planning to go public in the nearterm. We believe this could help crystallize the value of Cronos’ investments in these companies.
- Achieving a TSX Senior Exchange Listing.
- Evergreen and/or CannMart Being Granted Licenses.
Potential Risks for Cronos Group
- Crop Failure. The risk of a crop failure (low quality and/or yields) exists for any producer.
- Growth And Execution. Much of the upside we see in Cronos’ future financials is contingent upon the company scaling up production at Peace, ITZ and IR. Should the company be unable to secure financing for expansion, or generate the yields/pricing/costs we are expecting (or if it is pushed out in terms of timing), our target price may be revised downward. Reliance on Key Inputs. The company is heavily reliant on other parties for timely delivery of key inputs at stable prices. These inputs include utilities providing water, heat, and electricity. Any significant interruption in, or price hike of, these inputs in Cronos’ areas of operations could have an adverse impact to our target price.
- Licensing. Having been the first licensee under the MMPR framework and with over 100 inspections to date, we believe Cronos has a good relationship with Health Canada. While we believe this may provide a competitive advantage on the regulatory front (other LPs/applicants may simply not know what to look for causing delays/problems), there is no guarantee that the company will be able to maintain a positive relationship with Health Canada, renew licenses for its facilities annually, or achieve successful licensing for new properties in the future.
Source : Echelon wealth partners report