Why it’s only just the start for CBD oil…
26th May 2022 |
It’s a wonder that many cannabis-laced products still get a bad name.
The word “cannabis” alone is enough to bring scepticism from those who maintain outdated, misinformed views on so-called “drugs”.
However, the recent emergence and indeed success of cannabinol (CBD) products is causing policymakers to re-think their stance towards cannabis, as you’ll see below.
CBD products contain two substances: cannabinoids and tetrahydrocannabinol (THC). Both compounds are derived from the cannabis sativa plant.
THC is responsible for the “high” feeling that cannabis users experience.
That’s why it’s only used in small doses, with 0.2% being the maximum, legal concentration allowed in UK-licensed CBD products.
Its ability to provide a quick fix to ailments is breaking the boundaries of medical care and helping to change the misinformed narrative regarding cannabis use.
In fact, the World Health Organisation (WHO) recognises the benefits of CBD products.
According to the WHO, CBD has a “valuable therapeutic use for epilepsy, seizure and spasms” whilst also having the ability to treat several other complex conditions from “arthritis to depression.”
What’s more, the European Court of Justice (ECJ), the highest court of the European Union, has recognised the safety of CBD products, citing that they “do not have any harmful impact on human health.”
These important international institutions give a lot of credibility to CBD.
As well as health benefits, we believe the investment case for CBD oil is also strengthened by changing attitudes towards cannabis legalisation.
For example, a huge milestone was achieved in December 2021, when Malta became the first EU nation to legalise the cultivation and personal use of cannabis.
In doing so, Malta became only the fourth country in the world to legalise it for recreational purposes, along with Canada, Uruguay and Luxembourg.
This has been the catalyst for other European states to re-consider their stance towards the legalisation of cannabis.
For example, according to German health minister Karl Lauterbach, the country is set to legalise recreational cannabis “soon” after beginning the legalisation “process”.
What’s more, the UK is also investigating the possibility of de-criminalising cannabis.
Mayor of London, Sadiq Khan, has set up a London Drugs Commission group, to weigh up the impact of legalising cannabis in the UK.
Whilst this is far from an official legalisation of cannabis in the UK, it does show that a more positive, proactive stance is being taken by policymakers.
We believe that all this bodes well for CBD-centric stocks, including Frontier Tech Investor holding Kanabo Group (LSE: KNB).
Kanabo is a producer and distributor of medicinal cannabis products.
The company is in the process of commercial expansion.
Currently, Kanabo has an ongoing commercial agreement with medical-grade cannabis producer MedoCann Pharma, in which it has exclusive distribution rights in the German and UK CBD markets.
This puts Kanabo at the heart of the German CBD market, which is the largest in Europe. It is worth around €350 million, with the UK CBD market worth €330 million.
And if Germany goes on to legalise cannabis, we believe Kanabo will be a beneficiary from a rise in demand for cannabis-based products this could bring.
Kanabo also announced the potential acquisition of Materia, a Maltese-based processor and distributor of medicinal cannabis products, in July 2021.
Kanabo subsequently went a little quiet on this and has failed to deliver an update for some time.
However, on 20 May 2022, Kanabo confirmed that the proposed transaction with Materia, which you can be reminded of here, will now be executed as a strategic partnership instead of as an acquisition.
In part, this is to reduce shareholder exposure to dilution.
In particular, the deal may give Kanabo access to Materia’s EU-GMP production facility in Malta, although this is currently under negotiation.
If this is confirmed, Kanabo will be strategically placed to benefit from Malta’s recent legalisation of cannabis.
Amendments to the deal with Materia doesn’t change our positive long-term view on Kanabo, and there is no action for you to take.
We continue to view Kanabo as a front runner in the provision of CBD products, at a time where attitudes towards cannabis are improving.
Finally, we appreciate that Kanabo, like many other stocks, has seen its share price plummet over recent months. In fact, its current share price of 4GBp represents an 84% loss in the portfolio.
However, when you consider that Kanabo is undergoing commercial expansion in what could soon become two countries where cannabis is legalised, a current share price of 4GBp looks cheap.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Buy list update
Immotion Group (LSE: IMMO)
Immotion Group is a provider of virtual reality (VR) and simulations to tourist attractions.
Immotion is continuing to make great commercial process.
Its installations, which are so dependent on footfall, have captured pent-up demand after pandemic closures.
In particular, the company’s VR Gorilla Trek product is having commercial success.
Gorilla Trek is a VR experience which takes users on a journey through the Rwandan rainforests, where troops of gorillas live.
On 27 April 2022, Immotion announced its first major zoo agreement for Gorilla Trek.
The company signed a three-year agreement for the installation of a 24-seat VR theatre at Pittsburgh Zoo and PPG Aquarium. The VR theatre is set to open later this spring, and gain exposure to Pittsburgh Zoo’s 1 million annual visitors.
The good news doesn’t stop there.
On 19 May 2022, Immotion announced the signing of another zoo agreement for its Gorilla Trek product.
It will see Immotion install a 40-seat VR theatre at Milwaukee County Zoo. The zoo has an annual footfall of around 1.3 million visitors.
The attraction is due to open in July 2022, with the contract running until 31 December 2026.
We have high hopes for Immotion.
The company is realising its growth potential as it deploys its solutions to several major commercial centres across the world.
And with the VR market predicted to grow ten-fold, from $17.25 billion in 2020 to $184.66 billion by 2026, our optimism towards the company is reinforced.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Pod Point Group (LSE: PODP) – The UK’s inadequate (for now) electric vehicle (EV) charging network is threatening to bring the EV transition to a halt. By 2032, the shortfall of EV charge points in the UK is estimated to reach 250,000. However, Pod Point’s innovative range of EV charging solutions could go a long way in ensuring this deficit is reduced. The company’s charging technology is fit for homes, public charging bays, lamp posts and commercial buildings, and can ensure that the EV transition reaches all areas of the UK. In our view, Pod Point can unlock the potential of the UK’s EV charging network. You can find the original recommendation here.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. This includes power cables, fibre optics and charging plugs. It might sound a little basic, but these are critical mechanisms which are powering some of the key technologies of the modern day. These technologies include electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, particularly as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games which contains some of the most popular games of the gaming world. One of which is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the ease of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
