Aphria Inc (OTCMKTS:APHQF) continues to run in a seemingly unstoppable series of breakout moves. The latest pop to close last week represents a rise above the stock’s early December gap highs, granting shares their first close above the $12/share level. The move appears to have come in response to recent headlines out of the company. The most significant seems to be its latest expansion of the Tokyo Smoke relationship.
Specifically, the company just announced that it, and its partner, TS Brandco Holdings Inc. (aka Tokyo Smoke), have entered into a binding Letter of Intent dated December 20, 2017, setting out the terms pursuant to which DOJA proposes to acquire all of the issued and outstanding shares in the capital of Tokyo Smoke. According to the release, “the Merger will create a uniquely positioned cannabis company combining a best-in-class craft cannabis producer with an award-winning lifestyle brand and retail-focused cannabis company. It is anticipated that the combined company resulting from the Merger will use the name “Hiku Brands Company Ltd.” to refer to the brand house containing premium cannabis brands DOJA, Tokyo Smoke, and Van der Pop.”
Aphria Inc (OTCMKTS:APHQF) bills itself as a company that produces, supplies, and sells medical cannabis in Canada. Its cannabis products include dried flowers and cannabis oils. APHQF sells its products through its online store and telephone orders, as well as MMPR licensed producers.
According to press materials, “APHQF is one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis. Located in Leamington, Ontario, the greenhouse capital of Canada. APHQF is truly powered by sunlight, allowing for the most natural growing conditions available. We are committed to providing pharma-grade medical cannabis, superior patient care while balancing patient economics and returns to shareholders. We are the first public licensed producer to report positive cash flow from operations and the first to report positive earnings in consecutive quarters.”
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As noted above, APHQF shares have continued their torrid series of rips, this time catalyzed by a productive expansion of the company’s moves with Tokyo Smoke to create Hiku, which will refer to the brand house containing premium cannabis brands DOJA, Tokyo Smoke, and Van der Pop.
Alan Gertner, CEO of Tokyo Smoke, added, “DOJA is an incredible organization, team and brand. DOJA’s deeply authentic BC story combined with being one of the only licensed producers that have access to unique genetics through an import license creates a platform to provide customers an unrivaled premium experience. Not to mention, DOJA’s cultivation team has already demonstrated their ability to deliver on all levels of production, including quality, yield and ensuring the plant’s fullest potential is expressed through aroma, flavor, and effects. Craft British Columbia approach, top-notch branding, and retail will allow Hiku to have a distinctive business; high-quality control, high demand and high margin.”
“This strategic investment in and supply agreement with Hiku further bolsters our relationship with Tokyo Smoke and now DOJA, and reaffirms our commitment to expanding our product offering ahead of the recreational market,” said Vic Neufeld, Chief Executive Officer of Aphria. “This transaction has the twofold benefit of providing us access to strong brands, through Tokyo Smoke and DOJA, and craft-cultivated British Columbia bud, through DOJA. Quality product and recognizable consumer brands will be key differentiators for patients and consumers, and we’re looking forward to continuing our work with Hiku to create premium cannabis brands in Canada.”
Earning a current market cap value of $1670.9M, APHQF has a significant war chest ($38.2M) of cash on the books, which must be weighed relative to about $1.6M in total current liabilities. APHQF is pulling in trailing 12-month revenues of $22.2M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 39.9%. This may be a very interesting story and we will look forward to updating it again soon. Sign-up for continuing coverage on shares of $APHQF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $APHQF, either long or short, and we have not been compensated for this article.