PI Financial analyst Jason Zandberg thinks the Ontario government’s plans for selling marijuana will be a positive for established cannabis players.
Last Friday, the Ontario government announced that legislation would be introduced this fall that would be informaed by its experience in tobacco and alcohol. The province said key elements include an age minimum of 19, that it would sell marijuana though stand alone stores, 150 of which it expects to be open by 2020, and that “illicit” cannabis dispensers would not be considered legal retailers and would be shut down.
“We are committed to getting this transition right. When it comes to retail distribution, the LCBO has the expertise, experience and insight to ensure careful control of cannabis, helping us to discourage illicit market activity and see that illegal dispensaries are shut down,” said Ontario Finance Minister Charles Sousa.
Zandberg says the cannabis stocks he covers, namely ABcann Global (TSXV:ABCN), Aphria (TSX-APH), Aurora Cannabis (TSX:ACB), Canopy Growth Corp. (TSX-WEED), Cronos Group (TSXV-MJN), Emblem Corp. (TSXV-EMC), OrganiGram Holdings Inc. (TSXV-OGI), and MedReleaf (TSX-LEAF) all stand to benefit from the development.
“We believe the sales of recreational cannabis through the Province of Ontario will be positive for all ACMPR licensed producers,” the analyst says. “We believe larger producers like MedReleaf, Aphria, Canopy Growth and Aurora Cannabis may have an advantage negotiating supply agreements due to the scale of their operations. We expect more Provinces to announce plans for distribution similar to Ontario. We believe the strategy announced today focuses more on control of cannabis sales than maximizing demand. That said, the stated policies match our expectations and is a step in the right direction.”