CannTrust Holdings (TSE:TRST) Secures Distribution Agreement with SQDC

Benjamin A. Smith
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CannTrust Holdings Inc (TSE:TRST) (NYSE:CTST) (FRA:C9S) products will soon be available in La Belle Province. The company today announced it has finalized a Letter of Intent with Société québécoise du cannabis (SQDC) to provide Quebec with high quality cannabis for the recreational market. For a province that has experienced chronic supply shortages—especially early on as retail outlets were forced to close due to lack on product—the news is a welcomed outcome.

No supply number details were disseminated, so the lead-in to the agreement will measured. As CannTrust puts it, “The LOI will serve as an introduction of CannTrust’s recreational brands to the Quebec market beginning with two of the Company’s most established strains that will be available through SQDC later this year.” The company further comments that the LOI signifies “the first step” in a “long and impactful relationship” in Quebec, further signaling a deliberate arrangement.

Given this measured roll-out and recent broad market correction, it’s perhaps unsurprising that CannTrust hasn’t reacted more vigorously on the news. Company shares are currently lower by ↓1.08%, although that is besting the Horizons Marijuana Life Sciences Index ETF by a considerable margin (↓4.63%, as of this publishing). Either way, CannTrust shares have not dropped below the previously-announced underwritten public offering of 36,363,636 common shares at a price to the public of US$5.50 per share, which is a positive in this market environment.

The next material market event is fast approaching, with CannTrust announcing earnings before the bell Tuesday morning. It’s also a chance to undo some of negativity brought forth by Q4 2018/FY earnings, which uncharacteristically missed the mark. Investors will particularly focus on gross margins (35%), which chimed-in well below the Canadian LP average of about 50%. Management will host a post-ER conference call at 8:00am to grant investor further explanation.

Midas Letter will have additional coverage as events warrant.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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