With the Marijuana index up 30% in five days and going parabolic... I think Stemcell United (SCU) provides excellent exposure to the industry at the lowest market cap to peers ($14-16m).
SCU hit a market cap of around $374m back in 2017 when the share price rose to $1 following the appointment of Nevil Schoenmakers as a strategic adviser. Unfortunately, that was rather premature.
Many potential shareholders and probably several existing shareholders don't completely understand Stemcell United's business structure due to the numerous subsidiaries.
Firstly, I would like to state that the company's appointment of Paul Rosen is a strong indicator of incoming activity on the Cannabis/Hemp sector. Paul is a mover and shaker on the global Cannabis scene. He is the go-to guy in the Cannabis investment scene for commercialisation in the sector.
He co-founded PharmaCan Capital (now The Cronos Group) as a vehicle for investment into the sector. He is a visionary and was way ahead of the curve back in 2012. Altira Group purchased a US $1.8 billion stake in Cronos Group back in 2019. Cronos Group acts as an incubator and commercialisation pathway for Cannabis products. The current market cap of the Cronos group is $5.57 billion CAD, one cannot discount the immeasurable success Paul has had in the Cannabis industry, hence why he is referred to as a pioneer of the industry.
Paul is also on the advisory board of Key Investment partners, another major investment vehicle in the Cannabis sector. He has access to large funds through his status in the industry and involvement.
When it comes to Cannabis speaking events, Paul Rosen is the go-to guy.
Why would someone of his stature (access to serious capital markets) take an interest in Stemcell United, which from a pure international perspective looks like a small $14m mcap ASX micro cap struggling for wider recognition.
Well lets delve deeper into Stemcell United's business and we might discover why.
Important note: when viewing the Yunnan Hua Fang Industrial Hemp website, use the Chinese version and your browser's built in translation service. The company is primarily directed towards Chinese market exposure, therefore the English version is not updated. The Chinese version is regularly updated and you will be able to see latest product innovation and company activities.
The Chinese market has immense growth potential.
Yunnan Hua Feng Industrial Hemp Co has the capability to produce the following products:
It's important to remember that through it's holding in Yunnan Hua Fang Industrial Hemp Co, SCU already has commercial scale Hemp plantation, ready for market penetration through the numerous existing product offerings.
It's important to note that Yunnan Hua Fang Industrial Hemp Co is one of the few Chinese companies with an industrial hemp license.
Of particular interest to to Stemcell United is the penetration into the cosmetics market through Cannabis derived products.
Does Paul Rosen potentially see greater penetration into the Chinese market or Hemp based beauty/cosmetic products for the Western market?
Stemcell United also has a collaboration with a subsidiary of China Tobacco which is the Chinese government state owned Tobacco manufacturer and has a virtual monopoly on Tobacco products in China. Will Paul Rosen work on exacting further value from this collaboration?
2. Sea Grapes (Umibudou, Caulerpa lentillifera, Green Caviar)
Stemcell United has access to the lucrative sea grapes market through it's 50.1% holding in Shenzhen Lantene Dingzhi Biotechnology. Last quarter receipts from customers were A $3.7m and was primarily driven by Lantene's operation and sale of Sea Grapes to existing customers.
Retail pricing of Sea Grapes ranges between $10-20 per 100g. Penetration into Western markets are at initial stages. Sea grapes are popular in Japan for nutrition purposes and an ingredient in Chinese Traditional Medicine ("TCM").
There is certainly very strong potential for Sea Grapes or Sea Grape derived products to infiltrate western markets where TCM, functional and integrative medicine are a growing market. Especially alongside health supplements such as powdered algae which is growing immensely in popularity as a source of anti-oxidants and chlorophyll.
To that end, Stemcell United formed a joint venture with Blue Aqua Group to cultivate and grow Sea Grapes to a commercial scale in Singapore.
Blue Aqua Group have operations in 13 countries (Thailand, Vietnam, Malaysia, Indonesia, Singapore, Bangladesh, India, Ecuador, Brazil, Mexico, USA, Middle East, China) which will provide the joint-venture with additional exposure for Sea Grapes and Sea Grapes derived products.
In addition, there is a joint-venture with Temasek Polytechnic academic institution which is owned by the Singaporean Government.
3. Other products
In addition to Cannabis Sativa (Hemp) and Caulerpa Lentillifera (Sea Grapes), Stem Cell United is involved in the cultivation of Dendrobium Officinale, which is a rare and endangered Orchid used in Traditional Chinese Medicine and highly valued for it's medicinal properties.
While wild Dendrobium can fetch prices as high as US $16,000 per kg, domestically cultivated Dendrobium is worth between US $1,000 - $3,000.
SCU Price at posting:
2.0¢ Sentiment: Buy Disclosure: Held
(20min delay)