An announcement that the company plans to double its capacity has GMP Securities analyst Robert Fagan feeling expansive about The Supreme Cannabis Company (TSXV:FIRE).
This morning, FIRE announced it expects to double the annual output of its 7ACRES facility.
“Supreme Cannabis has been focused on scaling production of high-quality flower since becoming licensed in March 2016,” CEO John Fowler said. “In our view, the modular strategy driving our 7ACRES expansion de-risks the scaling of our operations while maintaining our reputation for high-end quality and supports our quality-based brand promise. As one of the newest publicly-listed Licensed Producers, we are one of the fastest scaling and have generated approximately $5.3 million of revenue in the first 9 months of revenue.”
Fagan says this is a positive development that underscores the company’s improving market positioning.
“We view FIRE’s update positively as it demonstrates the company is executing according to its plan, and our expectations, on the expansion of the Kincardine facility,” the analyst says. “The addition of three new grow rooms represented one of our expected catalysts for FIRE’s shares, hence we would expect this development to be positively received by investors. Another positive is that the update confirms FIRE will double its capacity at an opportune moment, just ahead of the start of recreational sales. Assuming licensing of the three new rooms occurs in July, this could position FIRE to begin harvesting in the early fall. This would provide FIRE additional volumes to help achieve greater penetration of the recreational market, as it would likely coincide with the timing of 2nd round product calls from the provinces. Lastly, we are encouraged by FIRE’s potential to diversify into the concentrates category which could be a significant market segment in the future, while offering potentially improved profitability over dried flower products.
In a research update to clients today, Fagan maintained his “Buy” rating and one-year price target of $3.00 on Supreme Cannabis, implying a return of 82.9 per cent at the time of publication.