What’s next for cannabis stocks as Canada moves to legalise recreational use
Australian cannabis investors can look into the future simply by looking to our North American cousins, says Niv Dagan from Peak Asset Management.
Canada has been a leader in opening cannabis markets. Will ASX-listed cannabis stocks benefit? And will we see more Canadian cannabis companies list here?
Cannabis market is interesting because on a federal level, the regulation is similar to Australia. Medicinal cannabis is allowed to be exported but focus is turning to recreational.
There is speculation that by June-July the Canadian government will allow recreational use.
Dispensary stores are already starting to pop up now and getting licences to sell flowers or tablets, vitamins, etc.
I think the ASX provides a compelling alternative for the pot stocks coming out of Canada now because they have to face much more stringent regulation from their home exchanges.
In Canada, if you are a listed entity and you want to raise capital, your shares are escrowed for four months – that will be a big draw card for the ASX to take advantage of.
But also, the exchange provides liquidity and access to different markets.
Canadian companies could be dual-listed – and get a larger presence globally.
Cannabis stocks have cooled recently after a big run last year. What is the outlook?
There was a huge uplift in Canadian cannabis stocks from December last year, but now they have settled back down.
I think the market is getting more discerning and people are looking to those that are actually generating revenue.
Now it comes down to fundamentals and those companies that have strong balance sheets or have some sort of competitive advantage.
Growers have already had their run, now it’s time for the value-add industries.
I think the scope will extend as far as education for enterprise or edibles and oils that will feed into the recreational market.
What does the future of the cannabis industry look like?
[We are] forecasting the [legislative] passing of recreational use. Dispensaries are popping up and we are seeing a retail franchise model start to develop.
No longer is investment limited to just the medicinal or cultivation side. In Canada the market is expanding and while it might not be as close for Australians, there will be similar moves to come.
Complementary industries will start coming into play — more than just the green matter.
A company like ASX-listed LifeSpot Health (ASX:LSH) will come to the fore, with its vaporiser that provides analysis on the temperature and concentration – targeted towards the medicinal market.
You have spent a lot of time in Vancouver recently, how do the Canadian stockmarkets compare to those here in Australia?
The two are very similar markets, with a lot of liquidity and with people who know the markets.
The Canadian investor is very astute, can be fairly conservative but is generally very interested to look at other markets.
There are three main markets that have developed significantly different specialities so that small companies in entrepreneurship or early stage mining trade in different markets to those bigger companies with substantial revenues.
(Canadian stockmarkets include the Toronto Stock Exchange, the TSX Venture Exchange and the Canadian Securities Exchange).
But just like Australia, trends of cannabis, blockchain, technology and mining are the most prominent… with renewable energy starting to gain traction to a lesser extent.
Niv Dagan is the founder and executive director of PEAK Asset Management. Before that, Niv headed up HC Securities, spent three years growing Halifax Investment’s capital markets division and also worked on the wholesale desk at Macquarie Bank, servicing a wide range of institutional, intermediary and offshore hedge funds.
At his time at Macquarie, Niv also worked closely with the non-for-profit sector and was jointly responsible for managing funds for a number of charities and high profile government enterprises.