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Cann Group Ltd (ASX:CAN) share price up 7% on Melbourne Airport agreement

The Cann Group Ltd (ASX: CAN) share price is up 6.8% so far today after the medicinal cannabis company said that it has signed an agreement with Australia Pacific Airports (Melbourne) (APAM) to lease a 37,000 metre squared facility.

Under the agreement, APAM will fund and carry out the main build of the facility. Then, after the initial build is complete, specialist greenhouse engineering consultancy business Aurora Larssen Projects (ALPS) will fit-out the facility.

Cann has estimated that the total capital expenditure will be around $100 million and employ 170 staff. It will fund this project through a combination of debt and equity to fund its new expansion project.

The CEO of Cann Group, Peter Crock, said “This site is ideally suited to our needs and the heads of agreement represents an important step that allows us to proceed with final design.

“APAM’s contribution to the construction of these facilities will enable Cann to invest additional capital in increased cultivation capacity; expanded development and production capabilities, while also allowing for further future expansion.”

“As per our ongoing strategy, the facility provides Cann with the necessary scale to compete on the global stage in the medicinal cannabis sector.”

According to Cann Group, APAM has an excellent track record of delivering large development projects on time.

The Chief of Property of APAM said “Cann’s decision to locate its facilities within the Melbourne Airport precinct is consistent with our strategy to attract high quality tenants that not only contribute to the long term objectives of the business, but seek to connect Victoria’s technology industry to the rest of the world.”

Foolish takeaway

Cann Group has very little revenue to speak of, however this agreement speaks of the ambitions of the company’s future growth plans.

Being next to Melbourne Airport is a good location for transporting the future product quickly to any location in Australia or indeed globally.

Until cannabis companies start generating sizeable revenue and profit I’ll be holding off on any investment considerations because the sector is still too much of a speculative bet at this stage for me.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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