Flora Growth Corp. (NASDAQ: FLGC) has recognized this Colombian opportunity and to put it quite simply, has pounced to create a low-cost cultivation operation that could provide them with a global footprint in the years to come.
Flora is a cann-a-bis company that will leverage natural, cost-effective cultivation practices to supply cann-a-bis derivatives to its diverse business divisions of cosmetics, he-mp textiles, and food and beverage.
As the operator of one of the largest outdoor cultivation facilities, Flora strives to market a higher-quality premium product at below market prices. By prioritizing natural ingredients and value-chain sustainability across its portfolio, Flora creates premium products that help consumers restore and thrive.
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5 Potential Reasons Why FLGC Could Be A Breakout Target
#1. Colombian regulation provides FLGC with a unique revenue opportunity.
#2. At least one analyst believes that Flora Growth Corp. (NASDAQ: FLGC) could be surprisingly undervalued with a 5x upside potential from Friday's closing valuation.
#3. The company believes revenue growth could be significant in 2022.
#4. With product expansion through Walmart(dot)com and Coppel, Flora Growth Corp. (NASDAQ: FLGC) is in prime position to potentially make itself a household name in the years to come.
#5. The company boasts the world’s lowest production costs for dried flower creating a much broader cushion for excellent pro-fit margins.
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New Colombian Regulation Further Increases Revenue Potential
The President of Colombia has accepted and signed into effect some exciting revisions related to the existing Colombian cann-a-bis laws which allow for the:
- Sale and export of raw cann-a-bis materials, namely dried flower, to international markets
- Manufacturing, sale, and export of ingestible cann-a-binoid products in Colombia
- Promotion and advertising of cann-a-bis brands and products in Colombia
These new regulations are expected to allow Flora to increase near-term and long-term revenue, optimize its product supply chain both domestically and abroad.(6)
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$11.50 Price Target From MKM Partners
Highlights from the report:
1H21 Recap: Flora reported 1H21 revenue of $2mn with a 60% gross margin, generating a net loss of -$4mn (-$1mn adjusted for one-time expenses). Flora guided to 2H21 revenue of $9mn-$11mn exclusive of announced M&A (Heimat and Vessel with combined trailing 12 mo revenue of $14mn) and exclusive of dried flower shipments.
This organic guidance is a sharp acceleration led by Kasa Wholefoods/Tropi and Flora Lab/Flora Beauty. Importantly, these organic numbers ($9mn-$11mn) were above our initial estimates ($7.6mn in 2H). When we launched on Flora, our numbers did not include any changes to Colombian legislation, nor did they include contributions from M&A.
The deals, which could close shortly, and shipments of dried CB flower provide further upside to guidance (and our former numbers), setting the stage for run-rate annual revenue of >$40mn as Flora exits 2021. Importantly, it will take very little revenue growth for Flora to become profitable. At a 60% gross margin, Flora would need to generate just another $2mn in organic revenue to become profitable (assuming organic revenue doesn't carry much additional SG&A).
We are raising our 2H21 and FY22 estimates for better than expected organic growth (2H21 and FY22) and legislative changes (FY22 forward). We are now modeling $12mn (from $7.6mn) in 2H21 net sales and +$1.8mn in adjusted EBITDA (from $0.7mn).
With the higher estimates (incl. legislative changes) our price target is now $11.50 (from $6).
Find the full report here.
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2022 Could Be A MONSTER Year For Revenue
Here's why...
Last month the company released this news: Flora Growth Provides 2022 Revenue Guidance of US$35-45Mn; Sets Date for Year End Review Webinar
This incorporates revenue contributions from its various operating divisions, including recently acquired Vessel Brand and wholesale cann-a-bis revenues from Cosechemos.
It also didn't hurt that the FLGC followed that news up with a bombshell to kick-off 2022.
Check it out:
Flora Growth Expands Product Distribution Through Walmart(dot)com and Coppel in Mexico
MIAMI & TORONTO, January 04, 2022--(BUSINESS WIRE)--Flora Growth Corp. (NASDAQ: FLGC) ("Flora" or the "Company"), a leading all-outdoor cultivator and manufacturer of global cann-a-bis products, announced today that its Mind Naturals skincare brand has launched sales through Walmart(dot)com and Coppel, a nationwide department store in Mexico. The launch includes 12 products from the Mind Naturals portfolio, initially on e-commerce with subsequent plans to sell in brick and mortar retail locations.
This launch expands upon last month’s initial orders for Mind Naturals to Mexico and Spain. Walmart is one of the leading retail chains in Central America, while Coppel has 1,253 stores in Mexico. It is estimated that the global market for cann-a-bis and its derivatives will generate sales of $102Bn by 2026, and Mexico is expected to be one of the countries with the highest commercialization of CB products.
Flora Beauty’s Mind Naturals is an inclusive brand that uses premium CB and quality, clean ingredients to create their product line. They were named a trendsetting brand at CosmoProf North America in 2021 for their innovation in sustainable packaging. In December, they were a top 12 finalist in Glosswire’s Global Pitch Competition, which includes beauty brands from across the globe.
"We are excited to begin bringing high-quality, sustainable CB skincare products to Mexico," said Luis Merchan, CEO of Flora Growth Corp. "This agreement represents our first foray into the Mexican market and furthers our global foothold as a leader in plant-based wellness and lifestyle brands. As the cann-a-bis market continues its rapid expansion across the globe and into various sectors, we are poised to meet the needs of the market at every touch point."
Read the full article here.
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Let's switch gears for a second and focus on what makes FLGC truly unique.
Colombia: A Potential Game-changer In The Global Cann-a-bis Industry (And How Flora Growth Corp. Could Benefit Greatly)
Long known for its illicit drug trade, Colombia is also a hotbed for agricultural businesses which include everything from coffee to bananas and cut flowers.
These commodities have made Colombia a force in the global market and cann-a-bis could be the next big economic breakout for this developing country.
Roughly 5 years ago, the Colombian government signed the 1787 bill into law. Law 1787 was created to regulate the use of medicinal cann-a-bis and its trade in the country.(4)
By doing this, Colombia joined a slew of other countries looking to explore the potential advantages of using cann-a-bis as an alternative to pharmaceuticals.
Legislators soon saw to create a legal framework allowing for cultivation, extraction, product manufacturing, and exporting of cann-a-bis-related products.
This is where Flora Growth Corp. (NASDAQ: FLGC) comes into play.
"Given its cost advantages, we believe Colombia is positioned to become a major global export hub for cann-a-bis, particularly if producers pursue EU GMP-compliant operating practices." - Canaccord Genuity(1)
The Cosechemos cultivation farm, Flora’s core division, is located in Bucaramanga, Colombia, and is licensed to cultivate 247 acres (100 hectares) of cann-a-bis.
With Cosechemos' demonstrated low production costs, Flora is ready to sell high-quality cann-a-bis at competitive prices.
