Why the Althea (ASX:AGH) share price is charging higher today

This cannabis company is finishing the week on a high…

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The Althea Group Holdings Ltd (ASX: AGH) share price is on course to end the week on a positive note.

In morning trade, the cannabis company’s shares are up 4% to 36.5 cents.

Why is the Althea share price climbing?

Investors have been bidding the Althea share price higher today following the release of a contract update.

According to the release, the company’s Canadian subsidiary, Peak Processing Solutions, has signed a manufacturing agreement with Delshen Therapeutics Corp. It is a wholly owned subsidiary of 48North Cannabis Corp, which is a Canadian cannabis licensed operator and brand marketer.

The release explains that under the agreement, Peak Processing Solutions will manufacture four products for 48North’s Latitude brand. The four products are a CBD body lotion, a 1:1 THC/CBD body lotion, CBD bath salts, and a 1:1 THC/CBD bath salts.

Management notes that the 1:1 bath salt product is already on the market, performing strongly and the only item of its kind currently available.

What is the contract worth to Althea?

The two-year, non-exclusive, agreement includes minimum order quantities with a combined value of approximately C$1.25 million.

These minimum order quantities, which operate on a per product basis, are required to be purchased over a period of 12 months from the date the first purchase order for each product is accepted by Peak Processing Solutions.

Althea’s CEO, Joshua Fegan, said: “This agreement with 48North is once again recognition that Peak is becoming a major player in the Canadian legal cannabis market. The opportunity to supply the well-known Latitude brand will enable the team at Peak to demonstrate their ability to produce fantastic topical and bath products, which consumers will love.”

“In addition to this latest 48North agreement, Peak continues to make great progress with more and more of our client’s products getting picked-up by the provincial distributors and hitting dispensary shelves. After receiving our Health Canada license in September 2020, Peak is expected to become EBITDA positive by the end of 2021,” he added.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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