• Ted Ohashi

The market likes what it sees from Sunniva (CSE: SNN)

Sunniva Inc. (CSE: SNN) (OTCQB: SNNVF) provided investors with a preliminary peek at how things are going in California and the market loved what they saw. All amounts are in Canadian dollars unless otherwise indicated.

SNN reported preliminary revenue of $14.0 million for the three months ended March 31, 2019. This was 169% over the revenue reported in the same quarter last year. The $14.0 million was made up of $10.0 million in sales from CP Logistics, a wholly-owned subsidiary through which SNN handles its branded product sales. Full-Scale Distributors and Natural Health Services contributed $2.3 million and $1.7 million respectively. First quarter margins will be a little lower, in the range of 30% - 35% due to costs associated with ramping up California operations. However, management remains confident that full 2019 margins will be in the 40% - 50% range.

SNN management provided guidance that in 2019, sales from CP Logistics, that is, from Sunniva branded sales would be $72 to $78 million. This does not include sales and revenues from other operations.

"In California, we now have the strategic pillars in place to ensure scalability and growth for our newly announced brands and we are very proud of our entire team for the execution and delivery of a very strong first quarter," said Dr. Anthony Holler, CEO of Sunniva. "Our $14.0 million in revenue during the first quarter is close to the total revenue generated by Sunniva in all of 2018. With strong leadership and operating assets producing premium cannabis products, supported by our recent distribution company acquisition, we continue to demonstrate our ability to achieve significant revenue growth and secure shelf space for our Sunniva brands throughout the state."

I spoke to Leith Pedersen, President of SNN who said there will be a full corporate update on Canada and the U.S. on April 29, 2019. In addition, full financial results for 2018 and before May 30, 2019 there will be a complete report on first quarter 2019 results. I can’t wait.

In my annual outlook, I said Sunniva was going to have a big year in 2019 and this is evidence it is happening. From an investment point of view, not only is this far too early to sell, it is still a time to be buying. If you look at the multiple of sales that cannabis companies trade for, you get a picture of what is possible. I referred to Kevin Jackson’s report on Seeking Alpha titled “Sunniva: A Golden Opportunity in 2019.” In mid-January 2019 when Jackson was talking about SNN going to $10 to $20 a share by the end of this year and I was quoting him, many people thought he was crazy. As we move forward from here, I think you will see more analysts fall in line with such forecasts.

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