Choom Holdings Is Laser Focused Ahead Of The Adult Use Market Rollout

Choom Holdings Is Laser Focused Ahead Of The Adult Use Market Rollout

During the last few months, Choom Holdings (CHOO.CN) (CHOOF) has been trading mixed and we’re favorable on this company ahead of the opening of Canada’s recreational marijuana market in October.

From manufacturing to retail, Choom is levered to a number of high-growth verticals of the Canadian marijuana market and this is a company that we’re watching closely. Choom owns two late-stage ACMPR applicants and has entered agreements to acquire two additional late-stage ACMPR applicants. On top of this, Choom has applied to open retail distribution outlets in several provinces and see this as an attractive element of the story and a major differentiator for the company.

Choom is focused on Canada’s recreational marijuana market as it offers high growth potential and an opportunity to build premium brands high margin brands. We are favorable on the business ’s structure since it’s comprised of four distinct divisions which can create value for each other and improve the value proposition of the entire company. Its divisions are focused on real estate, ACMPR applicants, retail dispensary operations, and their interest in developing a portfolio of ancillary brands.

Alberta: A Strategic Market for Choom

Last month, Choom secured an investment in Aurora Cannabis (ACB.TO) (ACBFF), a leading Canadian marijuana producer that provides Choom with significant assets and expertise. Choom has secured rights to 17 retail leases in highly sought after locations throughout Alberta and this provides a strategic opportunity for Aurora and Choom.

Last month, Aurora entered into an agreement with the Alberta Gaming, Liquor & Cannabis Commission (AGLC) to provide up to 25,000 kilograms of premium cannabis products for the first 6 weeks for the province’s recreational market. When compared to other distribution agreements, Aurora has been allocated the greatest quantity of distribution and this is a testament to the company’s leading position in Alberta.

Choom’s leverage into the recreational marijuana market in Alberta will provide significant growth opportunities for this partnership and will track how this relationship continues to evolve. Based on Aurora’s track record of earning investments, we wouldn’t be surprised if Aurora increased the size of its investment in Choom within the coming months.

Choom is in the middle of a major expansion and has been nothing short of an execution story. From acquiring strategic assets to securing strategic partners, the company has been delivering previously announced initiatives and contains several catalysts for growth.

During the next few weeks, we expect to receive updates on the previously announced acquisitions (completed and pending) and about the retail applications. We see this growth opportunities as significant and consider them to be major value drivers for the company. Choom is directed by a management team that has a proven track record of success and we’re positive on their ability to execute.

Although Choom has continued to execute, the shares have come off their highs and we see this an undervalued opportunity. We are favorable on Choom as a result of attractive operating structure, the continued execution, the management team, the growth opportunities, and the evaluation.

We are keeping a close watch on Choom which has been laser focused on securing retail assets, strategic partners and investment, supply arrangements, and is looking to grow and acquire strategic permit and production assets that will allow Choom to scale-up rapidly to meet the anticipated demand from the recreational market.

The company represents a differentiated opportunity that has a great deal of levers for growth and investors need to track Choom closely. We are bullish on the connection with Aurora and see this as a major value driver for the company. We wouldn’t be surprised to be see Choom acquired by Aurora and will track how this relationship continues to evolve.

Anthony Varrell is Managing Director of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

Published at Fri, 20 Jul 2018 00:52:23 +0000

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