Why the Little Green Pharma (ASX:LGP) share price is on the rise

The Little Green Pharma (ASX:LGP) share price is on the move today after the company announced a large purchase order and expansion plans.
The post Why the Little Green Pharma (ASX:LGP) share price is on the rise appeared first on The Motley Fool Australia. –

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Little Green Pharma (ASX: LGP) shares are on the move today after the company announced it has received a large purchase order and has plans for expansion. At the time of writing, the Little Green Pharma share price is trading at 73 cents, up 4.29% from Friday’s close. 

Let’s take a look at what the medicinal cannabis company reported.

Expansion Plans

The Little Green Pharma share price is heating up after the company announced plans to expand its cultivation and manufacturing facilities in the south west of Western Australia. Little Green Pharma stated it has entered into agreements to purchase both properties underlying its current facilities and two properties adjacent.

Little Green Pharma plans to use the land to double the site’s current indoor cultivation capacity and, eventually, quadruple its production. Construction on the expansion is expected to start in the second half of 2021.

Additionally, by purchasing the land the company currently leases, it will avoid paying rental fees of $170,000 per year.

Little Green Pharma estimates the land will cost between $5.5 million and $7.5 million. The funds to purchase the land will be made up of 70% cash and 30% scrip.

A scrip is, in this case, a promise of shares in exchange for goods. It will be valued at the 5-day volume-weighted average price, which the company states is 66.3 cents.

These shares will be new and fully paid and issued with shareholders approval. Though, the company hasn’t yet sought shareholder approval. Little Green Pharma stated that if it is unable to obtain shareholder approval, the purchase will either be made entirely in cash or cancelled.

Purchase order from Demecan

The second piece of news driving the Little Green Pharma share price today is the company’s announcement regarding a large purchase order from German medical cannabis producer Demecan.

Demecan has placed an order for 9000 x 15g units of the company’s cannabis flower medicines.

Little Green Pharma has a standing purchase agreement with Demecan, under which Demecan will purchase up to 1,000kgs of cultivated dried cannabis flower from the company per year.  

The latest purchase order is the second made between the two companies this year, with Demecan having ordered 500 x 15g units in February.

Little Green Pharma share price snapshot

Over the past 12 months, the Little Green Pharma share price has risen by more than 180%. The company’s shares are also up by more than 30% year to date.

Based on the current Little Green Pharma share price, the company has a market capitalisation of around $85 million with approximately 176 shares outstanding.

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Motley Fool contributor Brooke Cooper has no position in any of the shares mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Little Green Pharma (ASX:LGP) share price is on the rise appeared first on The Motley Fool Australia.

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