The author of this article, Desmond Fargo, gave me permission to publish this piece on Creative Edge Nutrition (FITX)
The purpose of this article is to provide useful insight into Cen Biotech's recent press release regarding license, and also provide a technical and fundamental analysis of the current market implications for CEN Biotech.
Investors trading in the company Cen Biotech (ticker: FITX) enjoyed a rising share price by as much as 25% on August 26th 2014. Much of the company's ongoing debate of MMPR license approval transpired readily after the company's CEO, Bill Chaaban released a short and powerfulpress release that left an indelible impression on the company's future prospects. In the release, Bill Chaaban stated:
" 'Health Canada inspectors were present on July 31, 2014 and conducted their pre-license inspection. The facility was built according to specifications provided to Health Canada. We look forward to the next steps in this amazing journey,' stated Bill Chaaban, President & CEO."
There are various ways to extrapolate this information, with the vast majority in tandem agreement that license is indeed at hand, but seemingly awaiting for Health Canada to send an official update on their list of authorized licensed producers website.
The underlying correlation between the fundamentals and technical analysis can be a topic of debate for many investors, often elusive to quantify. However, in rare occasions, one does see both technical and fundamental analysis coincide to paint the same outlook of market expectations. Below are two important charts that investors should take notice 1) Rounding bottom pattern and 2) Triangle Pattern.
FITX Rounding Bottom Pattern
Rounding tops and rounding bottoms occur as investors have an almost paradigm shift in their bearish or bullish expectations. This gradual, yet steady shift forms a rounded top (bearish) or in this case, a rounding bottom (bullish) as the outlook begins to conform to the market's expectations.
"Volume during both rounding top and rounding bottoms often mirrors the bowl-like shape of prices during a rounding bottom. Volume, which was high during the previous trend, (bearish) decreases as expectations shift and traders become indecisive. Volume then increases as the new trend is established" Technical Analysis from A to Z, Steven Achelis
The rounding bottom of FITX is a perfect example of this technical chart pattern. With volume of over 60 million trades, that was well above the average 17 million for the stock, it would be prudent that this shift has gradually occurred and will optimistically catapult to new highs investors have yet to seen.
Peter Canellis, owner of PGC Trading and co-founder of Trader's lounge explains:
In the FITX Rounding Bottom example you can see that the price climbs into the pattern. Once the pps runs into the trend line, the pps soars out and up to the right side. Typically once this occurs the pps begins to see large gains.
Ascending and Symmetrical Triangle Pattern
According to many technical traders, a triangle can occur as the range between peaks and troughs narrows. Triangles typically occur as prices encounter a support or resistance level that often constricts the price movement of the stock. There are varying forms of triangle patterns, much of which are focused on detecting breakout patterns.
A Symmetrical triangle pattern occurs when prices are making both lower highs and higher lows. An Ascending triangle pattern occurs when there are higher lows, but the highs are relatively at same price levels due largely to resistance. With continual support, the odds fair well that an upside breakout from an ascending triangle will occur. It is important to note that breakouts like these can often occur when there is an increase in volume. (FITX had 60 million in volume, average 20 million)
Courtesy of Peter Canellis, from Traders Lounge
Peter Canellis explains:
This chart is classic!! We have two Ascending Triangle formations and a Symmetrical Triangle formation. The triangles can be depicted on the chart above: The Long Term Ascending Triangle (A,B,C) The Medium Term Ascending Triangle (H,E,B) The Short Term Symmetrical Triangle (D,F,G). What does all this mean? Since May 21st we have been walking up along the trend line. Slowly and methodically heavy accumulation during this period occurred. On August 25th, the pps broke through the upper trend line of the Short Term Symmetrical Triangle (D,F,G). On August 26th, the pps broke through the upper trend line of the Medium Term Ascending Triangle (H,E,B) on high volume of roughly 60 million shares. Lastly, on August 27th, the pps retraced to the trend line (.0626) and tested the support level in this area. With the announcement that the facility has been inspected, investors are extremely confident that licensing is around the corner. I expect that we will continue to trade on or above the trend line over the next several days as we await news. The Long Term Ascending Triangle dictates a breakout in pps sometime between now and October 15th. Once this breakout occurs, depending factors driving the price, the first PPS target will be .1850. If indeed licensing news is the driving force, I expect PPS to possibly test the .65 -.70 range.
Many investors who had no tangible evidence to verify the inspection of Health Canada on July 31st, 2014, were able to document many photographs of the facility that day. J. Smith, a lead photographer captured a stunning photograph of what appeared to be Health Canada inspectors at the facility. This is again pressing example of how investors can actively seek awareness with their own network of information to make wise and prudent investment decisions. A photograph made by fitxlong.com, has mimicked this event is below:
Though this poster is amusing and has opened the doors of skeptics to demoralize investors with rumors of having no license, the recent press release has conferred strength to the thousands of investors that yet again, Cen Biotech has been vindicated from "penny stock stigma" by its own merit's alone.
CEN at UKRAINE
Impart from photographs and press releases that hint at license approval, an important and paramount speculation of license approval is Bill Chaaban's recent excursion to Ukraine. Many investors speculate that the CEO of a soon to be billion dollar company would not take time or consideration to meet with various high profile government officials if license was not deemed to be at hand. Likewise, Ukrainian government officials would not be so kind to appease CEN Biotech's enormous appetite in large scale production of medical marijuana if they did not imagine this company to have obtained license.
Much speculation behind Ukrainian government officials have attested to the belief that the company is in the works of large scale contracts with Canada's import and export of medical marijuana in accordance with Health Canada and Ministry of Health. Under Canada's new MMPR (Marihuana for Medical Purposes Regulations) license law, the provision allows the government to readily issue an export license to grow facilities such as CEN Biotech provided that product has been met at a domestic level. Canada export license. Export laws
It is feasible to speculate that CEN Biotech's facility and other leading competitors can provide the demand necessary to sustain medicine to the citizens of Canada. Though the exact estimate of these figures ranges from 40,000 (Statistical analysis from Canada) to roughly 500,000 within the next couple years, it is still somewhat ambiguous as how the market share for medicinal marijuana will react. The salient goal of CEN Biotech is to become the leader in marijuana production for Canada and the world. Thus, even producing a fraction of the 1.3 million lbs of marijuana that Cen Biotech claims to be able to produce, would still allow for a surplus of product to export in various parts of the world such as United States, Israel, and most recently, Ukraine.
According to the foreign affairs, trade and development department of Canada, Ukraine is the second largest country in Europe with a population of roughly 45 million citizens. Most recently in 2013, Canada has implemented various economical practices to enhance efficiency and productivity of the economy of Ukraine in various arenas. Canada's current achievements focused on Ukraine were:
It is clear that the focus from the Canadian government is to implement effective technological advances and teaching expertise in the field of horticultural agriculture.
To this end, it is not a far stretch to assume logically that Bill Chaaban is actively giving much needed attention and guidance in safe and effective marijuana grow operation practices in Ukraine. Under the partnership with RXNB that possess "patented proprietary, cutting-edge systems in the field of agriculture, applicable to medical marijuana" Bill Chaaban can show many Ukrainian farming facilities the fundamental importance of current Good Manufacturing Practices (cGMP). These guidelines are specifically adhered to under the new MMPR license agreements per Health Canada. Of note, the new partnership role that CEN Biotech has seemingly proclaimed in Ukraine is paramount to the import and export process of marijuana for not only the company, but Canada itself.
CEN appears to be crouched in wait to also infiltrate the US MMJ market through this unique Ukrainian template platform, which will be revealed as the company initiates more contracts in the future.
Notably, CEN Biotech explains on the company's facebook page:
Bill Chaaban met with Yuriy Shramko, Director of Invest Ukraine, The State Agency for Investment and National Projects of Ukraine regarding Medical Marijuana and Hemp. The meeting took place at the Offices of the Parliamentary Committee that oversees the Laws that may impact the Economic Development of Ukraine, which is the Committee that proposes changes to the laws where deemed necessary. Bill Chaaban also spoke in the offices of Sergey Yevtushenko, the Chairman of Ukraine Investment authority and national projects.
Another meeting convened by Bill Chaaban was with Vasil Govriligk , Head of the Society Development Political party & owner of multiple pharmaceutical facilities.
Lastly, a meeting with Mikhail Kaplun, Director of the Office of the Health Ministry of Kiev and Greater Region for the registration of drugs and medical devices was also paramount in the establishment of new laws and drugs for marijuana and hemp production.
These closed door conferences might have investors ponder the obvious focal point of significance; production of marijuana and hemp at a different country; perhaps a satellite company in varying degrees managed by Cen Biotech. Furthermore, the Canadian government has also recently resumed free trade talks with Ukraine to strengthen Kiev's ties with the West), and pave the way for deeper commercial relations.
This significant relationship is twofold; 1) Cen Biotech is able to augment their energy in various European countries and 2) Canada is able to strategically create stronger relationships with Ukraine in hopes of boosting their own import/export economy.
Bill Chaaban explains at the First Annual Weedstock conference:
We would be able to sell 1.32 million pounds marijuana, and once licensed we would be able to import and export product to countries that allow it. We have a market development and research team that is scouring the globe looking at laws for marijuana and hemp worldwide."
Again, it is important to note that Bill Chaaban would not show key interest in Ukraine if indeed no license was approved.
CEN Biotech severely undervalued
Many investors realize the tremendous potential opportunity CEN Biotech has created for the Canadian marijuana industry and are eagerly supporting this unprecedented exposure of various press releases from the company. The transparency of the CEO and critical strategic planning of events and projects has left many amazed at how quickly the company has gained traction in the marijuana and hemp industry.
Speculation of when the company would obtain license was far from certain and seemingly ambiguous in early February. Astonishingly, the price per share of CEN Biotech has almost lost 45% of its intrinsic value from the recent high of Feb at .11 cents and now currently trading at average price of .064 cents. To this end, a prudent investor would realize the hefty discount of the company's stock is rare opportunity to capitalize. In fact, now more than ever, CEN Biotech has made a plethora of press releases that fundamentally valuate this company to be a billion dollar company. Below are significant news releases in comparison to the price per share.
Legend indicating events:
|A||02/26: Partnership w/RXNB|
|B||03/07: Agreement to acquire Hemp Technology|
|C||03/10: Appointment of Ms. Anndrea Hermann|
|D||04/16: Retains Push Point Management|
|E||04/17: Appoints BOD John Germiario|
|F||04/23: Appoints BOD Dr. David Felten|
|G||04/30: Notified Health Canada facility ready for inspection|
|H||05/08: Appoints BOD Michael Clark|
|I||05/12: 2nd Medical Marijuana Facility purchased & Built Out|
|J||05/21: Retains Law firm Thompson Hine|
|K||05/23: Appoints BOD Dr. Kerry O'Banion|
|L||06/04: Finalizes deal with Hemp Technology|
|M||06/05: CEN presents at the first annual WeedStock Conference|
|N||06/06: Appoints Research Advisory Board, Dr. Jim Sweetman, Mike Colasanti, Jim Sweetman (mastergrower)|
|Q||06/13: ComputerShares as Stock Transfer agent|
|R||06/19: Deloitte retained for audit of RXNB and FITX & uplisting documentation|
|S||06/ 27: Launch of Wellness Medical Protection Insurance Group appointment of Ed Kuhn|
|U||7/07: Appoints BOD Dr. Roger Shaban, Eric Nashman, Keith Volpne|
|V||07/18: Appoints Vice Chairman Michael Clark|
|W||07/31: The Day Time Stood Still by Jordan Jim Smith|
|X||08/04: Appoints BOD Dr. Jonathan Lakey|
|Y||08-21: Ukraine government officials meeting|
|Z||08-26: Health Canada inspection press release|
Acquisition of Hemp Technologies
"CEN Biotec recently acquired the assets of the global holdings of Hemp Technologies Ltd. In particular, its operations in New Zealand, Canada and the United States among other countries. Hemp Technologies Ltd. is a vertically integrated company, which grows, processes and sells its hemp directly to the consumer and for industrial processing. In addition, it is instrumental in hemp home building and building materials, hemp spirits and food, and hemp pharmaceutical and dietary supplements."Hemp Aquisition
Clearly, many nominal benefits are present in the utilization of hemp, much of which will be discussed by CEN Biotech as the company expands operations into the hemp arena.
Anndrea Hermann, president of Hemp Technologies Global and Chief Development Science Officer of the Hemp Division at Creative Edge Nutrition, recently explained via email to the author of this article:
"The average yield per sq foot of hemp grain can yield in a range from 700-1000 lbs/acre, which are conservative estimates of production. HTG works with many different types of products from cold pressed Hemp Oil to Hemp Insulation."
One should note that if MMPR license agreements for marijuana and hemp are approved by Health Canada, CEN Biotech will ultimately be able to grow as much as 1000 lbs (453592 grams) of hemp. This yield can potentially triple the revenue of CEN Biotech.
Insurance Program: Reaching Beyond
As CEN Biotech materializes what they promised to deliver in insurance programs, many investors are noting the seemingly high profit margin that can supplement the company's earnings. Spearheaded by Ed Kuhn, who has been part of the CEN board since June 27th 2014, the Chicago based unit of CEN Biotech "is now offering coverage of up to $2 million per occurrence and $2 million aggregate to segments of the commercial marijuana industry." In other words, similar to home insurance, the policies will cover a range of risks such as theft, bodily injury, unusual occurrences, and other medical related precautionary measures.
Ed Kuhn, president of Wellness Medical Protection Group explains, "You could be looking at premium as high as $25 million in the next 12 months".
This is substantial and relatively a high profit margin for a commercialized insurance program. More information will be provided by CEN Biotech as the company prepares to start production of medical marijuana at their facility.
Author's Note: CEN is becoming more attractive to investors, and the prospects of the company's pipeline are promising. Investing in pennies on the dollar can be a risky investment, but with the overwhelming transparency that Bill Chaaban provides to shareholders, the merger acquisitions of HEMP Technologies and soon RXNB, and an extremely reputable board of directors, CEN is clearly paving the path to success and transforming the industry. Moreover, the company has established itself as transparent and a leading example of licensed and pre-licensed facilities. With a large base of investors that are scrutinizing every move of this company, it is of no surprise that this company has made significant strides to promise what it tends to deliver.
Investing in this company is a far cry from investing in a penny stock company-and one that all investors should now be able to confidently understand.
Caution should be given to new investors who would like to play conservatively with their investment. This is by no means a guaranteed successful investment, the critical risk currently would appear to be the license approval, all of which will undoubtedly be determined within the very near future.
Disclosure: The author is long FITX.