Planting underway at CropLogic’s CBD producing Trial Hemp Farm

After completing site preparations and seed germination, CropLogic Limited (ASX:CLI) has commenced planting at its 500 acre Trial Hemp Farm in Central Oregon.

The Trial Hemp Farm, operated by CLI’s wholly owned subsidiary LogicalCropping, will crop approximately 500 acres of CBD producing hemp over five sites using two different irrigation methods: aerial spraying circular pivot methodology and drip tape and mulch plastic methodology.

LogicalCropping as a source of premium CBD producing biomass and the planting process is supported with CLI agronomy and AgTech expertise.

Drip tape and mulch plastic methodology is a common irrigation method used for hemp on small scale farms.

The process of installing this irrigation system is an intricate one and involved initially laying drip tape and mulch plastic and then connecting each line of drip tape to a high-pressure hose and the irrigation pump.

Seedlings are then planted by a machine poking a hole in the mulch plastic, providing an allocation of water and then a worker planting the plant.

Although this process is intricate compared to other methods it is said to have a positive impact on yield in both plant volume and CBD percentage.

CLI will use its agronomy expertise and suite of AgTech products such as CropLogic RealTime and CropLogic Aerial Imagery to develop and optimise an evidence base this season by comparing yield rates with fields using pivot irrigation methodology.

CLI CEO James Cooper-Jones said, “A dedicated and experienced management team, with years of cropping and plant science experience provided by CropLogic, has seen LogicalCropping once again achieve a key milestone on time.

“These developments have not gone unnoticed. Interest in CropLogic’s farm management, agronomy and AgTech expertise and LogicalCropping as potential source of premium CBD producing hemp biomass mass continues to grow.”

Is CLI undervalued?

The $18.3 million capped CLI, is an award-winning global agricultural technology company providing digital agricultural cutting edge technology for decision support. After launching its product into Washington State, USA in 2017, CLI is servicing a significant portion of horticultural growers in this region, with a market share as high as 30% in some crops.

Following significant growth (2017-2018) in Washington State and Northern Oregon, in 2018, CropLogic expanded into the Idaho market.

CropLogic offers growers of irrigated crops with digital agricultural technology expertise based upon scientific research and delivered with cutting edge technology – science, agronomy and technology interwoven into an expert system for decision support.

CLI draws comparisons with fellow Australian grower, the $682 million Select Harvests (ASX:SHV), which generated earnings (EBIT) of $34.9 million in 2018, while carrying $70.8 million debt, as at June 30.

Comparisons with Elixinol Global (ASX:EXL; OTCQX:ELLXF) are also apt.

Like CLI, Elixinol has operations in the US. It is a manufacturer and global distributor of hemp dietary supplement and skincare products.

EXL has a $533 million market cap after the company's shares surged earlier this year on the back of outstanding year-on-year revenue growth.

CLI is also looking to capitalise on the changing landscape in the US.

The data it generates from farming industrial hemp at the trial farm this season will see it better poised to support the US hemp market — which is projected to triple to $22 billion by 2022 — with agronomic and technical support.

Furthermore, the number of licensed growers in Oregon climbed from 13 to 584 following the introduction of the 2018 US federal Farm Bill, and hemp acreage has swelled from essentially zero to more than 11,000 acres, and is likely to increase further still.

Considering at how Elixinol shareholders reacted to its year-on-year revenue growth, and that CLI's pre-tax profit in FY2020 should be about three times its current EV of $13 million, CLI looks to be in a strong position.

Notwithstanding, the loss reflected on its bottom line, notably due to ASX-listing expenses, the company is generating revenues that are expected to grow substantially.

As Trevor Hoey pointed out in a previous article, "Imagine snapping up CropLogic for $40 million less tax and completely recouping your investment in the space of 12 months - these are the sums that potential suitors will be doing in the relatively near-term".