On Wednesday, National Access Cannabis Corp (TSXV:META) announced that through one of its subsidiaries, NAC Prairies Ltd., The Company would be acquiring New Leaf Emporium Inc. in a deal valued at $1.6 million. New Leaf is based out of Moose Jaw, Saskatchewan and operates one of the only two cannabis shops in the city. It hasn’t been a smooth roll out of cannabis in Saskatchewan, where supply issues have forced some store owners to close up shop. However, with over 1 million people, it’s not a small market; Moose Jaw itself has around 35,000 people.
Nonetheless, it’s an important step for National Access Cannabis as it allows The Company to extend its reach into another province and will make it easier to make further moves within Saskatchewan.
Coffee chains turned pot shops?
Last year, The Company announced that it would be working with The Second Cup Ltd to create cannabis dispensaries in various parts of the country. Second Cup expressed had previously expressed an interest in converting its coffee shops into pot shops, and partnering with National Access Cannabis will help certainly help it do that.
With many Second Cup locations across the country, there’s a lot of potential here for two companies to make a big dent in the industry. However, it’s been a steady process thus far. Currently, there are 21 retail locations that National Access Cannabis owns that have been opened for business. The majority of those stores, 14, have been in Alberta, and seven more in Manitoba.
Alberta has been doing the best job of rolling out legal pot shops thus far, so it’s no surprise that it’s leading the way. Some provinces don’t permit retailers altogether, while in Ontario pot can only be purchases online for now as it still works on its retail model. It won’t be until at least April that we’ll see dispensaries open in Canada’s largest province.
Aggressive strategy could give The Company a big advantage
National Access Cannabis has been an aggressive player in the retail segment as last year it also acquired The Green Company Ltd, which does business as ‘NewLeaf Cannabis.’ The Company could be looking for more purchases given the very optimistic targets that it has set out for itself.
In October, National Access Cannabis announced plans to open as many as 150 locations in 2019. However, The Company was also expecting to have 50 opened by the end of 2018. Unfortunately, supply issues have plagued many pot shops across the country and overall it hasn’t been a smooth ride for the industry. In November, Alberta Gaming Liquor and Cannabis, which oversees the industry in its province, said that due to shortages in supply that it would stop accepting new cannabis applications.
Should you invest?
National Access Cannabis’ stock trades on the TSX Venture and with a market cap of around $100 million, it’s still has a long way to go in catching up to some of the bigger players in the industry. However, given the potential that is possesses in retail and once we see more progress on that front, it could attract a lot of attention.
The main concern I’d have about the stock is The Company’s aggressive forecasts which may come back to hurt it if it falls short of expectations.