Israel: Maturing into one of the Premier Cannabis Markets for Investment

October 29, 2019


During the last year, we have seen increased interest in the Israeli cannabis market from an investor and company standpoint and this is a trend that investors need to be aware of.

Last week, Calvin Broadus Jr., aka Snoop Dogg, announced a strategic partnership with an Israel-based cannabis ancillary business called Seedo and this announcement caught our attention. By forming this relationship, Snoop Dogg has joined a list of high-profile celebrities that are focused on the Israeli cannabis opportunity and this is a market that we are excited about for a number of reasons.

Earlier this month, we highlighted Isracann Biosciences (IPOT.CN) because we believe that the business represents an attractive play on the Israeli cannabis market. We believe that the increased interest from high-profile celebrities like Snoop Dogg is a testament to the strength of this market and we find this to be significant. Over the next year, we expect to see increased interest in the Israeli cannabis market and expect Isracann to be a major beneficiary of this.

Isracann Represents an Attractive Play on the Israeli Cannabis Market

2019 has been a banner year for the Israeli cannabis industry and we believe that this market is not even in the first inning of a multi-decade growth cycle. When analyzing companies that are focused on this market, we are looking for businesses that are well capitalized, that are led by a management team that is focused on creating value for shareholders, and that have visible catalysts for growth. We are of the opinion that Isaracann possesses these traits and are bullish on the amount of value that can be created through the Israeli market.

When looking at the cannabis industry, we consider Israel to be the new frontier and are bullish on this market for a number of reasons. First, the economics associated with cultivating cannabis in Israel are much more attractive than cultivating cannabis in Canada and this will provide companies like Isracann with a major competitive advantage. Second, from a proximity standpoint, shipping cannabis from Israel to the European Union (EU) is much quicker and easier than shipping cannabis from North America to Europe. Finally, the EU is much larger than North America from a population standpoint and has a large total addressable market (TAM).

These three factors leave us bullish on the Israel cannabis opportunity and we believe that Isracann is poised to be a leading operator in this market. Over the next year, we expect to see Isracann report several major milestones that solidify its position in Israel, and this is an opportunity to have on your radar.

An EU Cannabis Growth Story in the Making 

An important aspect of the Isracann story is related to its multi-faceted strategy for distribution and growth. With 220,000 sq. ft. of fully funded production capacity, the company is well positioned to capitalize on the EU Market and we are bullish on the growth prospects associated with this opportunity.

When compared to North America, the economics associated with the sale of cannabis in the EU are far more attractive. In the EU, cannabis comes at a higher cost to the consumer and this opinion is based on the price that leading Canadian cannabis producers are selling product to consumers for. The margins associated with these transactions tend to be higher and we find this to be significant.

From a geographic standpoint, Israel is not located that far from major European ports and this is positive for the companies that are levered to the market. Due to lower transportation costs (when compared to Canada), we expect margins to be even better for Israeli companies. Through its strategic distribution partners, Isracann will have a practical intermediate multinational trans-shipment entry point accessing Germany, United Kingdom, Poland and Denmark.

Germany is the first market that Isracann plans to target in the EU and we are bullish on this opportunity. Currently, Germany has no cultivation laws and imports cannabis from international markets. With a population of 80+ million, Germany represents a huge market and Isracann plans to capitalize on it. Soon after Israel joins Canada and the Netherlands as countries that allow for the legal export of cannabis, we expect to see the company plant its flag in Germany and will monitor this aspect for the business.

An Early Mover in A Quickly Maturing Market

Isracann commenced trading on the Canadian Stock Exchange (CSE) at a time when the market was trending lower and we believe that the recent weakness is transitory. Isracann has visible catalysts for growth and has an attractive risk-reward profile. We believe that this opportunity is underappreciated by the market and will continue to closely monitor the company.

We believe that Snoop Dogg’s decision to back an Israeli cannabis business provides important insight as it relates to where the industry is going. In the early years of Canada’s legal cannabis market, Snoop Dogg announced a partnership agreement with Canopy Growth Corporation (WEED.TO) (CGC) and this proved to be a profitable relationship for the world-renowned rapper.

Israel represents the new frontier for the legal cannabis industry and Isracann was an early mover when it comes to this market. During the last week, Isracann has bounced higher on strong momentum and this is a trend that we are bullish on. We believe that this emerging opportunity has been flying under the radar and are of the opinion that is an opportunity to put on your watch list.

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