Village Farms International (VFF): An under-the-radar cannabis stock that could soar

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July 25, 2019 10:41am NYSE:MJ

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From Eric Bowler

Village Farms International (VFF) is one of the less talked about cannabis stocks that could be set to take-off for a couple of key reasons…

VFF gets on the U.S. hemp train

Growers licensed by the Georgia Department of Agriculture will soon be allowed to grow and process hemp in Georgia, thanks to a new state law signed by Governor Brian Kemp in May, which legalized hemp farming in Georgia.

A couple weeks ago, Village Farms reported that they are “now well advanced in planning and engineering work to establish its centralized [CBD] extraction operations, which will be based in Georgia.” VFF expects the facility to be operational in the first quarter of 2020.

Last March, Village Farms formed a joint venture with Georgia farming company Nature Crisp, which began planting 700 of acres of hemp in Virginia, North Carolina and South Carolina, and plans to cultivate approximately 1,000 more acres of hemp in Georgia in 2020.

Village Farms International owns 65% of the joint-venture company, called Village Fields Hemp, while Nature Crisp owns 35% of it.

Village Fields Hemp already grows hemp across several states, but wants to produce the largest acreage in Georgia, where they also plan to build a 25,000-square-foot centralized extraction facility.

A company representative says that the facility will be capable of extracting thousands of acres of hemp grown in Georgia and from nearby states. However, the company will most likely need more capital to build, and hasn’t decided on an exact location yet.

Village Farms is hedging its bet on vegetables

VFF’s vegetable growing business has acted as a hedge by generating consistent revenue for the company. Nonetheless, growing vegetables a weather-dependent, low-margin business – though it does typically generate predictable cash flow.

The downside earlier this year was that Village Farms was dependent on their vegetable-growing operations for its near-term operating results, which left many people scratching their heads about the company’s higher valuation.

But VFF’s long-term vision was take these existing vegetable-growing greenhouses and potentially convert them for cannabis production.

In April, VFF’s joint-venture with Emerald Health Therapeutics, called Pure Sunfarms (of which VFF is a 50-50 partner), acquired a second 1.1-million-square-foot facility from Village Farms. In total, these two facilities should each produce at least 75,000 kilos per year for a combined 150,000 kilos of marijuana.

Emerald Health is expected to handle the financing and application of the retrofit process for cannabis production.

Although Pure Sunfarms is forecast to produce a lower yield per-square-foot than many of its competitors (about 71 grams per square foot), this production estimate might be one of the more credible ones in the cannabis industry, particularly at a time when so many investors have had their trust and expectations challenged by the industry.

Village Farms International Inc. (VFF) was trading at $11.33 per share on Thursday morning, up $0.47 (+4.33%). Year-to-date, VFF has declined %, versus a 12.94% rise in the benchmark S&P 500 index during the same period.

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About the Author: Eric Bowler

eric-bowlerEric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.

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