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Why the ECS Botanics (ASX:ECS) share price is moving higher today

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The ECS Botanics Holdings Ltd (ASX: ECS) share price started this morning flying high following a supply agreement from Murray Meds. At the time of writing, the agribusiness and hemp food company’s shares have since retreated are now trading up 3.2% at 6.4 cents.

Supply agreement propels the ECS Botanics share price

The ECS Botanics share price is surging today following the company’s latest announcement.

In today’s release, ECS advised that Murray Meds has entered into a supply agreement with an Australian cannabinoid company. This is the second supply contract that Murray Meds have signed within the last 4 weeks. The previous deal related to a three-year supply agreement with the Armour Group to sell and export medicinal cannabis oils in Germany and the United Kingdom.

Under the newly signed contract, Murray Meds will supply medicinal cannabis dried flower, concentrate, and oils to the undisclosed cannabinoid company.

The term will run over 3 years and generate total revenue of $750,000. However, the bulk of this ($500,000) will be spent within the first year. ECS has kept all other details about the supply agreement under wraps, particularly around pricing and units.

Who is Murray Meds?

In January, ECS signed a binding term sheet to acquire 100% of Murray Meds, a Victoria-based medical cannabis cultivator. Shareholders approved the acquisition this week, with settlement expected soon.

Located on the Murray River in North Western Victoria, Murray Meds operates a licenced medical cannabis cultivation and manufacturing facility. The company produces around 3,500kg of medicinal cannabis per year, consisting of dried flower, oils, and tinctures.

Words from the managing director

ECS managing director Alex Keach welcomed the news, saying:

This is the second supply contract Murray Meds has signed in recent weeks and validates that a low capex and operating medicinal cannabis facility can still meet pharmaceutical quality of the oil and premium priced dry flower market. I am so pleased that this narrative is becoming a reality in the market place.

ECS has previously collaborated and worked closely with the customer. We look forward to furthering this relationship and, with the acquisition of Murray Meds, expanding the ECS sales network from our production hubs in Victoria and Tasmania.

ECS Botanics share price snapshot

The ECS share price has rocketed since the beginning of December, gaining more than 113%. Recent positive announcements from the company look to have pushed its shares higher, to within sights of its all-time high.

Based on the current share price, ECS has a market capitalisation of close to $28 million.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks 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.

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