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MJardin Group Inc (CNSX:MJAR) Experienced Operator Hidden Gem of Cannabis Space

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

MJardin Group Inc (CNSX:MJAR) (OTCMKTS:MJARF) is an experienced cannabis platform, operating in the legal market since 2009. Executive Chairman Rishi Gautam explains MJardin is in a transition phase, evolving from an agency model to a principal model company, as it takes on assets to own and operate. MJardin already has 40 facilities across North America and is looking to expand into Europe. The company went public late last year on the CSE and is well financed. MJardin has a $28 million USD run rate and raised $26 million CAD when it went public. MJardin has a funded capacity of 80,000 kilograms annually and plans to enter the Canadian retail space.

Transcript:

James West:   Hey, Rishi, how are you?

Ed Milewski:  Hi, Rishi.

Rishi Gautam: Good, how are you?

James West:   We’re great, thanks very much. I think this is our first time chatting, isn’t it, Rishi?

Rishi Gautam: Yes it is, yeah.

James West:   Ok, cool. Well, let’s start with, give me an overview, what is MJardin all about?

Rishi Gautam: Sure. Mjardin, we’re based here in the US in Denver, office in Toronto as well. We consider ourselves a multi-country operator. We’ve been operating cannabis assets in the legal cannabis market since 2009, when Colorado first turned legal. We have a portfolio today of just under 40 facilities: cultivation, extraction, and retail across North America.

James West:   40?

Rishi Gautam: 40, that’s correct.

James West:   Wow.

Rishi Gautam: And with intentions to expand into Europe as well. So full operating engine, we do cultivation, extraction and retail, management of assets, and we’re an owner of assets going forward as we build out our portfolio. We’re doing so as a principal owner/operator in key markets in the US, Canada, and soon to be Europe.

James West:   Wow, that’s quite the footprint. What’s your revenue look like for 2018?

Rishi Gautam: So revenue in 2018, we are morphing our business from an agency model to a principal model, so over the last nine years, we’ve been operating assets as an agent. So if you have a big cannabis license in Nevada or Colorado or other legal markets, and you may not have the depth of expertise to monetize that license and asset, you would hire someone like MJardin historically to come in and run that asset for you, to turn the key. Th operations the HR, the genetics, everything that would acquire a full monetization of that asset.

So we have a legacy business of agency revenue and profit; we’ve been profitable the last year, profitable this year, $28 million revenue USD run rate for this year, and as we’re morphing into our principal model, we’re now taking on assets that we’re going to own and operate, we will expect to see a significant jump in our EBITDA profile with those ownership economics.

James West:   Wow, that’s impressive stuff, Rishi. So I’m looking at your share price – certainly the current general market weakness is not helping any of the cannabis companies, but it sounds to me like you’re more or less an undiscovered gem – a profitable company with 40 different facilities, you know, you said $28 million run rate?

Rishi Gautam: Correct.

James West:   Okay, interesting. Wow. So tell me about, how is it that the market doesn’t you know, know your story, yet? This is a new one on me.

Rishi Gautam: Well, we are a gem, like you said – now just a matter of other folks discovering who we are, what we do. We have a certain pride in ourselves as an operator first and foremost. We have invested into our business, developing software, developing a university system. We have just become public just under a month ago on the CSE and now we’re moving forward with investor relations and public relations, getting our word out, so it’s a process as we all know, but we believe we have the most operating experience in the space given the years that we have been doing this, so we’re getting the word out talking to good folks like you about what we’re doing.

Ed Milewski:  How much money did they raise when they went public?

James West:   How much money did you raise when you went public, Rishi?

Rishi Gautam: A small amount; $26 million CAD is what we raised, and we also did an acquisition of a Canadian business called GrowForce, which was a sister company of ours. Now, our Canadian operations and our US operations are now wholly owned under one roof, which is MJardin Group, so in total we have $50 million in cash on the balance sheet today, fully funded, we don’t need to go into the markets at these volatile prices today. So we have the cash we need, we have a strategic plan in place and are hand-down executing on our business.

James West:   Wow, that’s fascinating stuff. How much cannabis do you sell in a given year, from all of your operations?

Rishi Gautam: So if you take our entire portfolio and you take the full capacity of what we an produce, it’s over 80,000 kilos, and you’ll see that more reflected in our 2019 numbers as our Canadian portfolio evolves and turns from cultivation licenses to sales licenses and we go through that process of bringing that product to market.

So the number to keep in mind is over 80,000 kilos of funded capacity in North America.

James West:   Ooh, that’s a lot.

Rishi Gautam: We’ll have retail locations in the near term as well, in Canada.

James West:   Fantastic. Awesome. So are you operating in the United States at all?

Rishi Gautam: Yes we are, so we’re based on doing this interview here from our office in Colorado, we have an office in Denver, we have assets in Colorado and Nevada today, soon to be other locations as we expand through acquisition, and we have assets in Canada as well.

So about 350 people in our business today at the operational level in various facilities, and we have about 35 people in our appropriate staff in Denver and Toronto, and soon to be Europe, in Barcelona.

James West:   I see that you’ve actually designed and planned over 100 facilities, so you are in the business of equipping cannabis would-be growers before you actually became one yourself, is that sort of how this whole thing got started?

Rishi Gautam: Essentially, we started as an operator. So folks would come into the space, get a license, put some money together, and it would run into some sort of brick role, whether it was operationally or capitalization, and they needed an operator to help de-risk their business. So we were called into numerous occasions, numerous types of facilities, the good, the bad, the ugly, and we were put in a position where we had to monetize the license.

So that operating expertise, we’re now translating into being an owner-operator in markets that we want to be in. we have a very selective acquisition approach; we want to be in markets where we can generate real revenue, real cash flows today, rather than paying to wait. As we’ve seen throughout history, in this very short duration of the cannabis industry, it takes a long time for certain markets to open up and really get healthy revenues, healthy cash flow, so we want to pick our spots wisely, use our capital wisely, and go into markets where we can have a real revenue profile on Day One.

So that really narrows down the approach of where we’re going to go, and within those markets you want to find the right assets. And because we have this operating engine, 350-plus people doing this every day, we can send in people to diligence assets and frankly, we know the assets better than the owners do when we take a look at some of these facilities. We are able to know very succinctly from the operational standpoint and the usage of capital, where we can generate the most return.

James West:   Huh. That’s very interesting. It’s very refreshing to hear – that’s an excellent model. So are you still in the business of helping other LPs who might be hitting the brick wall, as you said?

Rishi Gautam: Currently, we are not. We are focused on our own portfolio, expanding our portfolio, expanding our portfolio as an owner-operator of assets. We’ve done that historically, we’ve done that for over nine years, we’ve de-risked a lot of assets, but today, going forward, we have capital, we have a strategic plan to acquire, and we’re executing on that plan to o it for ourselves, not for other LPs.

James West:   Wow, that is such a great model. I’m excited, and I can think of a dozen companies who I would introduce you to if you were still in the business of helping them, but of course, I understand why you’re focused on your own growth.

Ed Milewski:  Yeah, sounds like he really knows what he’s doing.

James West:   You bet. Okay, so Rishi, what do you got in store for us in 2019? I mean, it sounds like you guys are equipped to really bust it out sort of in 2019.

Rishi Gautam: Well, we have a great Board, key stakeholders, we have a strategic plan in plan in place to acquire markets again that fit that acquisition philosophy I described earlier, so stay tuned for that. We have a great plan to expand in North America. We put boots on the ground in Europe, and we plan to expand into Europe as well; we see some really low-hanging fruit at attractive valuations right now for us to come in and utilize our operating expertise to do with some of those assets across the pond. So look out for some near-term catalysts; we’re going to make some very smart moves in the market, using our operating capital and operational expertise.

James West:   Well, that’s fantastic. We’re going to send down our camera crew to check out some of your flagship operations, if that’s okay with you. It sounds like a great story and I wish I’d heard bout it sooner.

Rishi Gautam: There’s still time – you see the market out there, so there’s still time.

James West:   Exactly. I’m going to do some tax loss buying today. [laughter]

Rishi Gautam: Sounds good.

James West:   Okay, Rishi, well, that was fantastic. I really look forward to meeting you in person the next time you’re in Toronto, and I hope to see you in Colorado when we come down in person to shoot some of your operations.

Rishi Gautam: Absolutely, happy to host you. Thanks for your time.

James West:   Thank you. Bye for now.

Ed Milewski:  Thank you.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.