Earlier this year, we highlighted Empower Clinics (CSE:CBDT) as a company that has been in the middle of a major transition and as an opportunity to be aware of. Since then, the company has undergone a major restructuring and change at the helm. We are impressed by their execution on the M&A front and cleaning up the balance sheet thus far.
Although Empower Clinics has reported several major changes to the overall business, the market has not seemed to take notice. We find these changes to be significant and believe that the market does not fully appreciate the growth prospects associated with the current transition.
When looking at the Empower Clinic opportunity, we are excited about the company’s potential to grow through a number of revenue steams and find this to be significant. Empower owns a network of physician staffed medical clinics in Arizona, Nevada, Oregon and Washington state, that treat more than 165,000 patients with a variety of qualifying needs. The company benefits from having a highly scalable clinic franchise model, from selling CBD products, by extracting CBD at the wholesale level, and by monetizing its telemedicine technology platform.
Sun Valley: A Transformational Acquisition for Empower
Last month, Empower completed the transformational acquisition of Sun Valley Certification Clinics Holdings LLC. The acquisition of the Sun Valley clinic group has fundamentally changed the company’s direction and growth prospects by more than doubling the number of clinic locations, adding 6 new facilities in Arizona, Nevada, and a tele-medicine platform serving California. Sun Valley is one of the most reputable and organized clinic networks in Arizona, having performed over 61,000 certifications to date, and we are favorable on this acquisition.
The acquisition of Sun Valley has repositioned Empower as a vertically integrated global health and wellness company that helps consumers access products and specialized medical care for a variety of serious qualifying conditions. One of the reasons we are favorable on this acquisition is also related to the human capital that was acquired and that will play a key role in Empower’s ability to expand.
The acquisition is expected to create one of the largest clinic groups in the US medical cannabis industry and we find this to be significant. The combined company is much better positioned to rapidly expand the clinic network via the Sun Valley franchise program and this is something that we are excited about.
One of the reasons we are bullish on Empower is related to the launch of the Sun Valley franchise program. This is an attractive program that will allow for increased scalability and should lead to an increase in the amount of revenue being generated through the sale of company branded CBD products.
Under the franchise model, franchisees retain the rights for specific territories where they can operate Empower clinics and sell company branded CBD products. Under the model, Empower is entitled to receive upfront franchise fees, ongoing clinic royalties, product royalties, and will own the patient database information. We are favorable on the structure and the amount of value that can be created for Empower.
Highly Levered to the Burgeoning US CBD Market
Sun Valley already has a well-established CBD product line and we expect this to be complimentary to what Empower has accomplished with its Sollievo brand. So far, Empower has a number of distribution strategies for Sollievo and we find this to be significant. The company’s products target a number of indications (sleep, chronic pain, insomnia, digestion, anxiety, and more) and own the proprietary formulations for these products.
During the last year, there has been a massive increase in the amount of demand for CBD products and this a trend that has shown zero signs of slowing down. Empower is well positioned to capitalize on this trend and has been laser focused on the CBD opportunity. Over the next year, we expect to see Empower report strong growth from its CBD business and are favorable on this aspect of the story.
Earlier this year, Empower announced plans to open its first fully functional hemp-based CBD extraction facility in Portland, Oregon in the second quarter of 2019. The 5,000 sq. ft. facility is capable of producing more than 6,000 kilograms of extracted product per year and we are favorable on the amount of revenue that can be generated from this. The location offers Empower significant room to expand and can hold four extraction systems that can produce more than 24,000 kilograms per year.
Empower has started selling its Sollievo products through its network of company-owned clinics and we are favorable on the growth prospects associated with the opening of additional clinics. Empower’s patients and customers will be able to access the company’s home delivery and e-commerce platform, and are expected to benefit from access to high margin derivative products. We are favorable on the amount of revenue that can be generated through the sale of CBD products to a network of more than 165,000 patients and will monitor how the team is able to execute.
An important aspect of the Empower story is related to the development of a proprietary software to manage patients through the medical cannabis process. We believe that the company’s proprietary technology is one of the most important aspects of the operation as it is a HIPPA compliant Electronic Health Record (EHR) system and patient management tool. This platform plays a key role in Empower’s ability to store data, to sell Sollievo and Sun Valley CBD products, and to offer a telemedicine service.
Another exciting aspect of the Empower story is related to the non-binding term sheet that it has with Aibeida LifeTech. Under the letter of intent, Aibeida has agreed to: sell and license specialized extraction equipment to Empower; provide facility build-out and set-up services; complete licensing and permitting requirements; perform equipment set-up, testing and activation; and provide ongoing facility management and maintenance for the first Empower CBD extraction facility.
We are favorable on the growth prospects associated with this relationship and will monitor how the teams are able to execute on this. The Empower CBD extraction facility is expected to provide the company with vertical integration into the CBD supply chain, and produce isolates, distillates and crude oil that have shown successful third-party test results in Aibeida’s initial test facility.
Empower expects to start distributing CBD products on the national level through its e-commerce and its clinic platform. The focus on distribution is critical for the success of any product and we are favorable on the work that Empower has done on this side of the business. Over the next year, we expect to see the company start reporting strong growth from the sale of its CBD products and this is an area that is underappreciated by the street.
An Opportunity that is Flying under the Radar
Over the next year, we expect to see Empower report massive growth and are favorable on the leadership team that is place. During the last year, the company has made several important changes to the management team and we find this to be significant. Earlier this year, Empower appointed Steven McAuley as Chief Executive Officer following the resignation of Craig Snyder. Steven represents a significant addition with more than 20 year’s experience in senior leadership roles and we are favorable on the experience that he brings to the company.
Although 2019 has been a major year for Empower Clinics, the shares have been under pressure and this is a trend that we continue to monitor. When it comes to Empower, we believe that the company has several significant potential catalysts for growth and are favorable on the risk-reward scenario at current levels.
When you look at the changes that the company has made to the management team and acquisitions that have been completed, you can see that Empower Clinics represents a reinvigorated opportunity that has massive growth prospects. With a market cap of approx. $17 million, we find the valuation to be attractive especially when compared to its peers and this is an opportunity to be watching.
To stay up to date with Empower Clinics, please reach out to firstname.lastname@example.org.
Pursuant to an agreement between StoneBridge Partners LLC and Empower Clinics we have been hired for a period of 180 days beginning May 28, 2019 and ending November 28, 2019 to publicly disseminate information about (EPW) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (EPW) for or were paid “ZERO” shares of unrestricted or restricted common shares. We own zero (0) shares of (EPW), which we purchased in the open market. We plan to sell the “ZERO” shares of (EPW) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (EPW) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.
Published at Tue, 25 Jun 2019 11:04:58 +0000