Is This The Most Undervalued and Highest Growth ASX-Listed Cannabis Stock?

ECS Botanics is planning to expand its Tasmanian operations by a hundredfold as it lodges plans with the Office of Drug Control to upsize its cultivation area from 2,500 sqm to 320,000 sqm.

ECS Botanics (ASX:ECS) recently announced it had lodged plans with the Office of Drug Control (ODC) to expand its Tasmanian operations, again building on its current position as the ASX's largest and lowest-cost producer of medicinal cannabis in Australia.

The company will be focusing on producing low-THC cannabis in Tasmania, most of which will be grown outdoors, to be used in the creation of CBD products.

In the meantime, ECS is already harvesting and selling large volumes of biomass from its Victorian operations, while in the midst of harvesting and signing contracts for its dry flower production, cultivated in large commercial greenhouses.

The company is producing a range of cannabis products while pursuing aggressive expansion to fuel growth and expand its market share in Australia and overseas.

Moreover, the choice of outdoor cultivation allows ECS to capitalize upon recently reduced fencing requirements by the ODC.

As the Office of Drug Control previously stated:

"Broadacre (outdoor cannabis cultivation) is the lowest cost option at $75 per square metre or $888 per kg dried flower, and indoor the most expensive at $2,291 per sqm or $1,909 per kg dried flower. This translates to an annualised cost at maturity of $9.9 million per annum for broadacre and $21.2 million for indoor cultivation."

ECS will also be positioned as a crucial supplier of CBD to companies ahead of the down-scheduling of low-dose cannabidiol from Schedule 4 to Schedule 3, and their eventual availability in pharmacies over the counter.

The announcement follows a recently established supply agreement with Releaf Clinics to provide dried flower to Releaf's clinics across Australia, in light of recent news that there has been a cannabis shortage across the country for medical patients.

ECS Botanics's Managing Director Alex Keach discussing ECS's medicinal cannabis facility.

At the time of the announcement, ECS's founder and Managing Director Alex Keach stated that the company's "ability to produce a high-quality product at scale, at low-cost, then value add material through GMP manufacturing, makes us highly attractive and a preferred supplier in the marketplace."

The Green Fund had the opportunity to visit ECS's operations in Cressy, Tasmania at the beginning of the year, where we were able to see the foundations of what may become the future of Australian cannabis cultivation. Now, the company is finally utilizing the copious amount of open, sunny space in Tasmania to actualize its potential.

Speaking with The Green Fund on the company's recent expansion, Alex Keach said that "Tassie is all about hemp."

Alex Keach ECS

"We plan to produce broad acre hemp just like poppies are grown in Tasmania. We cultivate at scale and we manufacture at scale. The quantity of contained cannabinoids we can yield under our recent expansion plans dwarfs the number of cannabinoids that are currently produced in Australia."

"Between November and April, the Tasmanian sunlight hours and perfect climate, as well as the excess UV created by the hole in the ozone is weirdly an added bonus when it comes to cannabis cultivation," concluded Keach.

Is this the most undervalued pot stock in Australia?

To find out if ECS is undervalued, we first have to examine the contextual backdrop of the Australian medicinal cannabis market.

Firstly, Australian medicinal cannabis product approvals are continuing to break records via the TGA's SAS-B portal scheme, with last month nearly reaching 10,000 approvals.

Secondly, the TGA has down-scheduled CBD medicines from Schedule 4 to Schedule 3, meaning that CBD medicines will be available over the counter in the next few years, which will lead to a spike in demand from both consumers and manufacturers.

As such, demand for cannabinoid medicines will only continue to skyrocket over the coming years, and low-cost producers will be able to dominate this growing market.

SAS-B approvals
Source: TGA

ECS Botanics (ASX:ECS) is currently valued at AUD $0.051 per share, which is a tenth of the price of Cann Group, which is another ASX-listed cannabis cultivator.

ECS has a GMP license, is utilizing indoor and outdoor growing at scale, which will allow the company to produce significantly lower-cost cannabis material than its competitors.

As ECS's cultivation operations continue to grow, it will continue to grow on its position as the lowest-cost, highest-scale cannabis company in Australia, uniquely growing its cannabis outdoors which will allow the company to align itself with the coinciding movement towards organic products.

Don't forget the company is on track to deliver in excess of $1m revenue this year, a combination of revenue from its medicinal business and hemp food and wellness business. The company cultivates hemp food crops at scale and sells hemp food products online and in Woolworths.

ECS is leading the movement towards organic cannabis production, with both the Victorian site only utilising certified organic input, while the Tasmanian facility is certified organic in transition.

ECS also has the advantage of being an Australian producer, with GMP recognition between Australia and Europe, which is advantageous as there also seems to be a shift in the market with buyers starting to opt for Australian cannabis material rather than imported material.

This is likely to fuel interest in ECS, and particularly if the TGA cracks down on cheap non-GMP imports. Regardless, ECS is producing at a low cost (as low as 60c per gram) and will continue to drive the shift from imported to local cannabis in Australia. 🚀

Disclaimer: Past performance is not an indicator of future performance.

Get the Latest Marijuana News &
Content in your Inbox!

All your support helps The Green Fund keep writing content for all you
marijuana enthusiasts and potential pot stock investors

Louis O'Neill
Louis O'Neill

Louis is a writer based in Sydney with a focus on social and political issues. Having interviewed local politicians and entrepreneurs, Louis now focuses on cannabis culture, legislation & reform.