Hexo Corp (OTCMKTS: HYYDF) is one cannabis play that has quickly attracted a huge shareholder base as it continues to move up the charts. The stock is one of the most actively traded cannabis stocks with a history of big move more than quadrupling over the past year.
Cannabis is a great place to be; according to a recent report from Arcview Market Research and its research partner BDS Analytics, over the next 10 years, the legal cannabis industry will see much progress around the globe and spending on legal cannabis worldwide is expected to hit $57 billion by 2027. The adult-use (recreational) market will cover 67% of the spending; medical marijuana will take up the remaining 33%. The largest group of cannabis buyers will be in North America, going from $9.2 billion in 2017 to $47.3 billion a decade later. Of course much of this hinges on how laws progress.
Hexo Corp (TSX: HEXO) (OTCMKTS: HYYDF) is one of the country’s lowest-cost producers, HEXO is rapidly increasing its production capacity in the lead up to the adult-use cannabis market. The Company currently operates with over 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.
HEXO holds an interest in a 2,004,000 sq. ft. facility in Belleville, Ontario. The building, previously used as a Sears distribution center, will be owned in a joint venture with Olegna Holdings Inc. Initially, HEXO plans to lease up to 500,000 sq. ft. of the space from the joint venture. The proposed use of the building is conditional on the city approving the rezoning application.
HEXO is also making progress outside Quebec, the Company recently entered into a supply agreement with the Ontario Cannabis Store. Under the deal, the Company will supply the province with its award-winning Elixir product line, along with its newly launched Fleur de Lune, an intimate cannabis oil. The Elixir product offering includes several formulations such as THC, CBD, or 1:1 in either a peppermint oil or a medium-chain triglyceride (MCT) carrier oil. Elixir and Fleur de Lune are smoke-free, easy-to-use and will be sold in childproof packaging.
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Last month Hexo announced the first harvest of plants from its new 250,000 sq. ft. greenhouse. HEXO’s 250,000 sq. ft. greenhouse expansion, together with the manufacturing expansion, brings the Company’s total production space to over 310,000 sq. ft. Construction on the Company’s one million square foot facility is set to be complete by year-end.
The Company also recently signed a contract to manage a warehouse and distribution center for Quebec adult-use webstore orders for the Société québécoise du cannabis (“SQDC”). HEXO and Metro will work together to run the modern 58,000 sq. ft. facility located in Montreal. The facility consists of a warehouse and distribution center, will house product from all the licensed producers who have contracts with the SQDC and will contribute to the creation of 35 new jobs in Quebec.
Hexo made big headlines earlier this year when they formed a joint venture with Molson Coors Canada to pursue opportunities to develop non-alcoholic, cannabis-infused beverages for the Canadian market following legalization. The joint venture, Truss, will be led by former Molson Coors executive, Brett Vye, in the role of Chief Executive Officer who stated “With the backing of two partners with deep Canadian roots, proven success, and market-leading experience in the respective beverage and cannabis industries in Canada, Truss will hit the ground running. When consumable cannabis is legalized in Canada, Truss will be ready to make its mark as a responsible leader in providing high-quality beverages for the Canadian consumer. Why “Truss”? We are joining together the extensive experience and excellent practices of each partner to build a powerful foundation for the future.”
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Currently trading at a market valuation exceeding $1.5 billion HEXO has $1 million in the treasury, $247 million in short term investments, is virtually debt free and reported revenues of $1,240,172 for the 3 months ended April 30, 2018. Hexo is one exciting Company; they are the largest licensed producer based in the province of Quebec and is uniquely positioned to become the dominant supplier for the second largest province in Canada and potentially other provinces. Hexo currently has over 310,000 sq. ft. of production capacity and construction on another 1,000,000 sq. ft. expansion set to be complete by year end. Hexo also holds an interest in a 2,004,000 sq. ft. facility in Belleville, Ontario. HEXO joint venture with Molson Coors Canada to pursue opportunities to develop non-alcoholic, cannabis-infused beverages is a huge reason to be excited about this Company. We will be updating on HEXO when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with HEXO.
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Disclosure: we hold no position in HEXO either long or short and we have not been compensated for this article