During the last month, Emblem (EMC.V) (EMMBF) has come off its recent lows and has been trending higher.

This rally was long overdue as the Canadian cannabis producer was trading at very oversold levels. Emblem has been very busy and has been laser focused on execution ahead of the opening of Canada’s recreational cannabis market.

2018 has been a banner year for Emblem and the company has been in the middle of a major turnaround. This execution comes under the new CEO Nick Dean, who took over at the helm in December 2017. We are favorable on the recent developments and have issued an updated on the company.

Continues to Advance Canadian Operations

In August, Emblem established a working capital advance for Natura Naturals Holdings to support the completion of phase 1 construction while the companies complete due diligence and negotiation of a definitive agreement in connection with the previously announced acquisition of Natura by Emblem.

This was a significant acquisition and we expect it prove to be accretive. Natura operates a 662,000 sq. ft licensed greenhouse that is currently undergoing a phased conversion and retrofit. After the completion of phase 1, Natura expects to achieve an annual run-rate of 15,000 kgs. Natura expects to have its first harvest early in the fourth quarter. Once completed in 2019, the facility is expected to be able to produce approximately 70,000 kilograms of premium cannabis per year.

This acquisition was reported earlier in the summer and the market had a fairly muted response. Emblem was under considerable pressure this summer and the shares traded lower with the market during this time. The lack of a response from the market was surprising since this acquisition significantly enhances the company’s value proposition.

Emblem has significantly improved its distribution by securing agreements with the Ontario Cannabis Store and the Alberta Gaming, Liquor and Cannabis Commission. The Canadian cannabis producer also has a relationship with Shoppers Drug Mart and is laser focused on increasing production capacity to supply these channels. Immediate production from Natura addresses the growing demand from the new markets coming online for Emblem and we are monitoring how the team continues to execute.

Focused on the European Medical Cannabis Opportunity

In late June, Emblem announced the formation of a joint venture with German pharmaceutical wholesaler Acnos Pharma GmbH for the purpose of exporting Emblem branded cannabis products from Canada and importing them into Germany. The joint venture will operate under the name Emblem Germany and will be 60% owned by Emblem, subject to the completion of definitive agreements.

Subject to the entering into of definitive agreements, Emblem will supply the joint venture with cannabis oil for sale to German pharmacies, wholesalers and clinical labs for medical purposes. The companies expect to commence export sales to Germany in 2019.

This is a significant relationship and places Emblem branded products in one the most exciting markets. In early 2017, Germany legalized medical marijuana and represents a massive opportunity, with a population north of 80 million. Germany will also provide Emblem with a stepping stone to other European markets and we are favorable on this relationship.

An Undervalued High-Growth Opportunity

Emblem is in the middle of a major expansion and this is a company that is flying under the radar. Although the shares have rallied well off its August lows, the valuation is very attractive, especially when compared to its peers.

With a market cap of approx. $190 million and a balance sheet with over $80 million in cash, Emblem represents a very attractive growth opportunity. The Canadian cannabis producer has been executing flawlessly and has several catalysts for growth. When you look at other opportunities in the sector, you will see that Emblem is underappreciated by the street.

We are favorable on the new leadership team and their ability to create value for shareholders. Emblem is well positioned to capitalize on Canada’s recreational market when the market opens and we are monitoring how the team continues to execute. This is a stock that investors need to be watching.