Origin House

Brands, Advisory, Holdings

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Volume | Market Cap | Shares | PEG Ratio | EPS

Fundamentals.

Profile:
HQ: Ottawa, Canada
Founded: 1985
Facilities: 5 in California, Canada, Puerto Rico
Symbol: ORHOF (OTC), OH (CNX)

Focus: Strong
Origin House is focused on establishing itself as a fully integrated operator in the legal cannabis sector with licensed production, manufacturing, and distribution facilities. Origin House is  actively interested in investing the area of brands, research/intellectual property, and infrastructure for its cannabis business with operations in Canada, Puerto Rico and US. Recently Origin House agreed to be acquired by Cresco Labs to become the market leader in the cannabis industry by consolidating production and distribution resources.

Size: Neutral
Market Cap: US $366.7 mil
Enterprise value: $351 mil
# of employees: 350+

Markets: Strong
Primary:  Canada, California
Secondary:   Puerto Rico

Subsidiaries: 16 overall

Operations: Strong
Cultivation:
Present capacity: 92,000 sq ft
Future capacity: 1.5 million sq ft

Origin House agreed to be acquired by Cresco Labs, which will significantly increase its production capacity once approved by regulators and shareholders.

Distribution:
Direct salesYes
Store networks: California (300+), Canada (22)
Supply Agreements: Origin House signed distribution agreement with Henry’s Original and Utopia Cannabis to provide strategic financing for branded manufactured cannabis products

Integration/Diversification:
Vertically integrated: Yes, around 410,000 patients
Horizontally diversified: No

Financials:  Strong
Outstanding shares (diluted): 35.89 mil
Revenue last year: $14.42 mil
Revenue rank in cannabis industry: 13th
EPS: ($0.12)

Management: Strong
CEO: Marc Lustig
CFO: Francois Perrault

Branding: Neutral
Origin House is positioned to become the preferred choice for promising cannabis products in California by providing a full range of support solutions through their accelerator program. Origin house gathers proprietary information on brands and customers through their distribution channel.

Valuation: Neutral
Current share price: US $5.46
Price to Sales: 15.40
52 Week Low/High: $3.47 to $9.75
EV / Revenue: 15.66
Price to Book: 2.45

Financings: Strong
In 2018, Origin House raised net proceeds from a convertible debt issuance in July 2018 of $31.2 million, net proceeds on a deal financing in April 2018 of $11.9 million, net proceeds from Trichome’s private placement in September 2018 of $13.2 million and net proceeds from the issuance and exercise of warrants of $33.0 million.

Risks: Neutral
The risks of investing in any cannabis or hemp company are currently high given the newness of the market. The risks of investing in this company are higher given the number of approved licenses in Canada and competition in California.

Recommendation: Neutral
Origin House is focused on establishing itself as a fully integrated operator in the legal cannabis sector with licensed production, manufacturing, and distribution facilities.

Origin House is forming strategic product distribution financing partnerships with specialty craft cultivators to supply high quality flower and trim for their branded products. Origin House smartly collects proprietary data on brands and customers through this distribution network.

Origin House has established a strong distribution network of more than 450 dispensaries which is used by its partners. Although they are currently spending more than they generate in revenue, they have a significant amount of cash balance of around $13.8 million to continue operations.

Based on the most recent annual filings, Origin House’s price to sales (P/S) is 15.4 which is slightly higher than we’d like but lower than normal for a company in cannabis industry. Based on this ratio, Origin House stock is not too risky, which makes it ideal for investors with low risk appetite.

Origin House’s debt to equity ratio of 0.08 is exceptional and makes this stock tempting as less debt means less risk. Due to interest rate expenses, high level of debt can be bad for company earnings if the business is not doing well.

In 2019, Origin House management agreed to its acquisition by Cresco Labs, which will significantly increase its production capacity once approved by regulators and shareholders. Leadership has more than 30 years in the area of cannabis cultivation, licensing and marketing at reputable pharmaceutical companies.

Origin House management holds 3.42% of company outstanding shares listed which shows their moderate confidence in long term outlook of the company.

For these reasons, we think Origin House, at or near its current price of $5.46 a share, is still a very good investment opportunity—though as the price rises this opportunity will eventually disappear. We are optimistic about its chances.

Origin House (CannaRoyalty)

ORHOF (OTC), OH (CNX)

Recommendation: Strong

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Technical Analysis of Origin House (ORHOF)