THC is expecting net profit of over $1 million in 2017.

The Hydroponics Company (ASX:THC) aims to list on the ASX through an initial public offering (IPO) of up to 40 million shares priced at $0.20 to raise up to $8 million.

Funds will be used to expand THC’s market share as a key manufacturer and distributor of hydroponics equipment, materials and related services.

The company is targeting to list on the ASX on the 20th of April, 2017 under the ticker code THC.

Company revenues are expected to increase from $5+ million in 2017 to $15+ million by 2018.

Net profit from the Hydroponics division is expected to be more than $1 million in 2017 and the group is targeting more than $3 million net profit in 2018.

Hamish MacDonald, CEO, commented: “We have a highly experienced team of experts in place and our strategy to increase annualised revenues from more than $5 million in 2017 to more than $15 million by 2018 reflects the aggressive growth we anticipate over the next 12-24 months as we position THC as a leading cannabis company with multiple revenue streams.”

Background

THC offers a range of equipment for cannabis cultivation and processing, as well as high-end next generation agricultural products across Australia, Asia, U.S. and Canada.

It also has agreements to acquire and/or collaborate with companies, technologies or projects that are aligned with its objectives to expand in the global cannabis industry in the near term.

THC’s core business units will include:

- Research and development;
- Hydroponic equipment; and
- Greenhouse design and construction.

The research and development business is anchored by the acquisition of Canndeo Limited, which provides THC with over 17 years of experience in the breeding, variety selection and growth management of cannabis.

THC also has an agreement to acquire Crystal Mountain and Dragon Vision (CMDV).

CMDV has traded for over five years with high profitability and will drive the majority of revenue and earnings for THC in 2017 and 2018.

North America setting the example

The North American cannabis industry is experiencing 30-40% annual growth rates, driven by a trend to legalise cannabis for both medical and recreational use.

The projected total economic impact of the U.S. cannabis industry is estimated to be between US$24.4 and US$44 billion for 2020, representing a 250% increase over 2016.

THC is well positioned to capitalise on this growth in 2017 and beyond, with significant cannabis prospects and a highly experienced management team with a proven track record to drive growth, both organically and through acquisitions.

The medicinal cannabis market in Australia is estimated to be worth more than $100 million.

Analysis

THC is listing on the ASX to expand its multiple established operations, during a period of substantial growth in the global cannabis industry.

It is a diversified, vertically integrated cannabis company with multiple opportunities to deliver value for THC’s shareholders in the near term.

The burgeoning market in North America and liberalised laws surrounding cannabis production have created a high demand for THC's hydroponic product line.

The sector is experiencing double digit growth as increasingly laws are passed in Australia, New Zealand, Europe, U.S. and Canada permitting the possession and consumption of cannabis either for medical or recreational purposes.