National Access Cannabis Corp Mints New Highs Amidst Junior Cannabis Slump
With junior small cap cannabis under-performance continuing today, National Access Cannabis Corp (CVE:META) (OTCMKTS:NACNF) (FRA:1HV) stood out. The cannabis healthcare service provider attained new all-time intraday highs, bucking the slow burn dogging most Canadian LPs currently. We attempt to make sense of the dichotomy.
So what is National Access Cannabis (NAC) all about anyway? That was a question I had to find out for myself, as the company tends to fly under-the-radar in most Canadian cannabis conversations. I, like many, was unfamiliar with their story.
According to their website, NAC describes themselves as “a unique Health Care service provider that specializes in prescribing medical cannabis, and provides members with ongoing education and care.” The company services clients through ten retail locations in operation as of February 28, 2018, with another ten locations planned in the province of Manitoba—this time on the recreational side. The latter will be operated under NAC’s retail brand known as Meta Cannabis Supply Co.
Unlike many cannabis juniors, National Access Cannabis is not a licensed producer. They conduct ancillary services to clients to help facilitate medical cannabis access, such as discuss medical conditions, arrange medical marijuana card paperwork, provide access to knowledgeable physicians, and assist patients in selecting medical-appropriate strains. In short, they provide full-spectrum consultation services for cannabis patients, without growing the flower themselves.
Perhaps the latter point holds the key as to why NAC has been outperforming the sector. While many Canadian LP’s strain under heavy competition, cut-throat production costs, and tightening financing environment, NAC steers clear from those concerns. While junior LPs stay up at night worrying about coming up with $80 million to finance the next mega-automated greenhouse, NAC’s capital commitments are much less rigorous.
Expenses for the three months ended February 28, 2018 was just $1,523,299 versus $739,027 in the same period in the prior year. This was due to the expansion of corporate offices, increased headcount and corporate business initiatives. Granted, their business model likely precludes the company from ever being a revenue goliath in the space (revenues were just $475,412 for the 3-month period ended February 28, 2018) , but NAC doesn’t incur the same type of going concern risk many juniors face.
Right now, that may be why price action remains strong. Not just NAC mind you, but other cannabis retailers like Medmen Enterprises Inc. and Green Thumb Industries Inc. have been outperforming as well. Although the latter two are primarily focused in the United States, all share the same common denominator—capital outlays remain modest relative to the focused licensed producer (GTI and Medmen are both, yet retail-centric).
That’s not to say National Access Cannabis hasn’t been executing organically. But I can’t find anything in the recent news flow to account for NAC’s substantial dichotomy vis-à-vis the rest of the junior cannabis space.
Since June 18, NAC has risen by ↑83.09%, despite issuing only one non-material press release during that time (July 3). Meanwhile, junior LPs like Newstrike Brands (↓25.38%), Emerald Health Therapeutics (↓23.67%) and Manitoba’s own Delta 9 Cannabis (↓11.72%) have buckled. In fact, you’d be hard pressed to find any junior cannabis stock with positive gains during that stretch—the market has been that punishing.
Whether the controlled capital outlays theory (less going concern risk) has merit or not, I cannot say. I’m simply do not follow National Access Cannabis close enough to defend that hypothesis. But NAC’s stock out-performance is becoming hard to ignore, even if relatively few are talking about it.
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