Over the last year, cannabis investors have been targeting companies that are levered to the burgeoning markets in Canada and California. Sunniva Inc. (CSE: SNN) (OTCQX:SNNVF) is a vertically integrated medical cannabis company levered to the burgeoning medical marijuana markets in both Canada and California. Canada has been leading the global cannabis movement and California’s marijuana market is expected to be the largest market in the world.

We consider Sunniva to be a very exciting opportunity given its leverage to these burgeoning marijuana markets. The company also possesses several important traits that we look for in cannabis investment opportunities. Sunniva is led by a management team that has been able to virtually de-risk the business model by leveraging strategic commercial real estate and merchant banking relationships to produce an expected 100,000 kilograms of dried cannabis flower and trim at full capacity.

Sunniva has been laser focused on execution and recently secured a strategic supply agreement with the largest licensed marijuana producer in the world, Canopy Growth Corporation (WEED.TO) (TWMJF). The company is well capitalized and well positioned to continue to grow through organic and inorganic growth initiatives and today we have provided an overview on the company.

Sunniva: A North American Opportunity

Over the last year, Sunniva has been nothing short of an execution story and is well positioned for continued success. The company has completed strategic acquisitions that have already proven to be accretive and we are excited by the potential for growth.

In October, Sunniva recorded a milestone and was granted a Conditional Use Permit for its California facility. The following month, the company broke ground on the California facility, designed to be current Good Manufacturing Practice (cGMP) compliant, which has the option of having a dispensary on-site and is expected to be operational by the third quarter of 2018.

Sunniva has taken a very strategic and profitable approach to the California facility. The company expects 30% of the facility cultivation to be initially manufactured into higher margin extracted products. The company is actively pursuing long-term supply contracts with brands for private label services.

Earlier this month, Sunniva’s Sun Oil extraction facility became operational and is a manufacturing facility for cannabis extracts. The facility will serve not only as a proof of concept producing oils for existing device customers and will provide genetics for the larger Sunniva Greenhouse facility. The facility can produce 500 pounds of Bio mass for extractions a day.

We are favorable on the leverage to the smokeless product opportunity and view this as a major growth driver for Sunniva. The cannabis oil opportunity is very enticing due to the better economics as the products typically come with a higher price tag and better margins. We view this as a significant opportunity for Sunniva and will monitor how the company continues to execute.

A Canadian Leader in the Making

Sunniva’s wholly owned subsidiary, Natural Health Services Ltd. (NHS) serves as the company’s education vertical and currently operates seven medical clinics and educational centers in Canada. NHS currently has more than 95,000 active current patients and in 2017, the company launched the Spark Patient software which connects Licensed Producers (LPs) to physicians and patients. Spark is now working with 27 LPs and is an attractive aspect of the business.

Sunniva Medical Inc. (SMI) receieved its Confirmation of Readiness for a License under the Access to Cannabis for Medical Purposes Regulations from health Canada yesterday and this is a major milestone reached for the firm.

This month, Sunniva selected the 126-acre Okanagan Falls, British Columbia site to build SMI’s Sunniva Canada Campus. As part of the site selection process, the company reviewed several options, and decided that the Okanagan Falls site provides superior benefits and flexibility. SMI plans to build 700,000 sq. ft. of cGMP greenhouses, which could produce more than 100,000 kilograms of premium cannabis flower a year plus higher margin extracted products such as capsules, cartridges, tinctures and creams.

Earlier this year, Sunniva announced a strategic definitive supply agreement with Canopy Growth Corporation. Under the terms of the agreement, Canopy Growth will purchase up to 45,000 kilograms of dried cannabis annually and distribute Sunniva branded products. Canopy Growth and Sunniva will share in the revenues as product is sold through Canopy Growth’s distribution network including its online marketplace, Tweed Main Street and via provincial distribution channels. The revenue share will be based on the strain, sales channel and other relevant factors.

A De-Risked and Long-Term Opportunity

Sunniva has already virtually de-risked its business model by leveraging strategic commercial real estate and merchant banking relationships to produce an expected 100,000 kilograms of dried cannabis flower and trim at full capacity.

Sunniva is negotiating long-term supply agreements with high-volume retailers and distributors of cannabis products in California as well as Canada. We are favorable on the leverage to these major marijuana markets and view Sunniva as a leading opportunity. There are very few companies as attractively positioned as Sunniva and this is a stock investors need to keep an eye on.