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The Green Organic Dutchman tackles Canada's recreational cannabis market as it powers ahead

Snapshot

TGOD’s operations are focused on medical cannabis markets in Canada, Europe, the Caribbean and Latin America as well as the adult recreational market in Canada

Green Organic Dutchman Holdings Ltd. -

Quick facts: Green Organic Dutchman Holdings Ltd.

Price: 0.355 CAD

TSX:TGOD
Market: TSX
Market Cap: $136.47 m
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  • Largest certified organic cannabis producer in Canada
  • Focused mainly on medical cannabis in Canada, Europe, the Caribbean and Latin America as well as the Canadian recreational market
  • Recently received its cannabis oil sales license from Health Canada
  • Lodged application over the summer to list on Nasdaq

What Green Organic Dutchman does:

The Green Organic Dutchman Holdings Ltd (TSE:TGOD) (OTCMKTS:TGODF), or TGOD as it is commonly referred to as, is a certified organic cannabis producer in Canada – the largest licensed producer, in fact. The company’s name is an acknowledgment of its roots: established by Dutch founders, the company grows organic cannabis.

Its cannabis is grown naturally in Canada without the use of synthetic pesticides, herbicides or fertilizers. The cannabis is not subject to irradiation, which can extend the shelf life of foods by paring back the number of microorganisms that cause spoilage, but can also affect the cannabis’s terpene profile. Terpenes are the aromatic compounds in the plant which are responsible for its scent and flavor.

Zeroing in on the details, TGOD’s operations are focused on medical cannabis markets in Canada, Europe, the Caribbean and Latin America as well as the adult recreational market in Canada. The company also has organic hemp CBD (cannabidiol) operations in Canada, and through its subsidiary, HemPoland, distributes premium hemp CBD oil in the EU.

TGOD extracts the cannabis oils found in its products using carbon dioxide, a process that doesn’t involve additives that can be harmful to the environment.

A 2018 Hill & Knowlton research study found that 57% of Canadian medical cannabis consumers and 43% of recreational cannabis consumers prefer organic cannabis.

How is it doing:

It has been a gangbuster time for TGOD. The company has been busy building out its facilities in Ontario, Quebec and Jamaica with more than 1,476,000 square feet of hybrid greenhouses and processing facilities under construction in Canada and more than 167,000 square feet planned internationally across Europe and Jamaica.

 

The company also recently announced new cannabis orders from Alberta, Manitoba and Nova Scotia that ship out in December, which signals the scope of its distribution. And according to its third-quarter results, TGOD’s Canadian sales jumped by to $0.6 million thanks to its recent entrance into Canada’s recreational market.

TGOD expects to reach combined production of 219,000 kilograms of cannabis around 2021.

The group recently received its oil sales license from Health Canada. The move will allow the company to transform its organic raw material into a variety of higher-margin cannabis products.

At the company’s outpost in Ancaster, Ontario, the firm has won permission from regulators to operate its greenhouse and its December harvest is set to provide TGOD’s first material revenues in Canada in the first quarter of 2020. When this facility is finished completely, TGOD will be capable of growing 17,500 kgs of organic cannabis per year.

TGOD’s Valleyfield facility is located in Quebec and includes a natural gas power plant, which will also help to shave down costs.

At the start of 2019, the company reached an agreement with Queen Genetics/Knud Jepsen A/S in Denmark, which will help the company expand throughout Europe. Last year, the company invested $35 million to acquire the Polish CBD company HemPoland. And in April, it reported a bit of encouraging news that HemPoland has received organic certification from EKOGWARANCJA PTRE, the largest certification body supported by the Polish Ministry of Agriculture and Rural Development.

TGOD also opened its second legal cannabis retail store in Jamaica this year, along with Epican Medicinals. Located on Montego Bay’s strip, the flagship location opened in May.

TGOD doesn’t appear poised to slow down: it has expanded internationally through Jamaica, Denmark, Poland and Mexico and continues to explore other strategic positions. As well as its international footprint, TGOD also boasts a high production capacity in Canada.

On the home front, the market looks bright: Ontario and Quebec represent two-thirds of the Canadian population with a potential market valued at C$1.12 billion to C$2.68 billion.

TGOD’s recently received oil sales license from Health Canada is also a critical milestone, allowing it to transform from its premium organic raw material into a variety of higher-margin cannabis products, which will crack the door ajar for a wider repertoire of product sales to medical patients.

On the financing side, the company has raised more than C$450 million to fund both its domestic and international plans.

Inflection points:

  • TGOD’s Valleyfield facility is located in Quebec, home to the lowest power rates in Canada, giving the company a competitive advantage.
  • The organic cannabis cultivated in the hybrid facilities can be sold at a 34% premium on average in the industry
  • TGOD is looking to export cannabis globally once it receives an eGMP certification
  • The desire for an organic product is high: A 2018 Hill & Knowlton research study found that 57% of Canadian medical cannabis consumers and 43% of recreational cannabis consumers prefer organic cannabis
  • TGOD’s December harvest from its hybrid greenhouse in Ancaster, Ontario will enable its first material revenues in Canada in the first quarter of 2020

What the boss says:

TGOD’s recent entry into the recreational market is promising and CEO Brian Athaide said the company is steadily widening its reach away from its traditional focus on medical cannabis in Canada, Europe and Latin America. The company is also just on the cusp of profitability, Athaide predicted.

“Despite the challenging market conditions in Canada, TGOD has an opportunity to be one of the first cash-flow positive cannabis companies as early as the second quarter of 2020,” the CEO told Proactive in a recent interview. “We rightsized our production and our first hybrid greenhouse is being commissioned, allowing us to produce at optimal levels while avoiding excess inventory or incurring unnecessarily high operating expenses.”

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