The weakness in the penny-stock sector has no mercy. Even good companies, like Alkame Holdings, Inc. (OTCPINK: ALKM), are being pulled down as the broader market continues to see sector-wide declines. But, the pullback in ALKM also provides a value opportunity. The company announced multiple deals that could be accretive in the coming quarters. Thus, investing with a medium to long-term horizon could be most beneficial.
Several deals caught investor’s attention before the market weakness. Those deals drove the stock higher, reaching YTD gains of 425% on Tuesday. Most recently, ALKM announced that its wholly-owned subsidiary West Coast Co-Packer, Inc., signed a development and production agreement with Shmellins Market, LLC. to develop and beta test consumer products. The good news is that this deal is expected to accelerate new product development agreements with Shmellins, which is expanding its consumer products line.
The agreement is a third win for West Coast Co-Packer this year.
Multiple Deals Add Value
In what could be a substantial long-term win, ALKM announced in February that West Coast Co-Packer received an initial purchase order for Handout Protection hand sanitizer and wash combo single-use packets. That agreement, made through their Canadian Personal Protection Equipment (PPE) distributor, TheraProducts Canada, Inc., could be a long-term value driver for ALKM by capitalizing on that product’s potential best-in-class COVID-19 bacteria-killing ability.
In fact, Handout Protection could become a staple item for consumers after demonstrating effectiveness in killing known COVID-19 strains and the new coronavirus variants known to spread 50% quicker than COVID-19. It’s also one of the few portable hand wash and sanitizer packets that allow people to wash and sanitize their entire hand.
Better still, meeting requirements by medical professionals, Handout Protection enables users to clean their palms and the tops and sides of the hands, including the fingers, under the nails, and up to the wrist to fight and kill bacteria and germs. And, even as the pandemic gets put under control, it’s unlikely that demand for effective sanitizing and germ-killing products will decline. That’s excellent news for ALKM…and could be a huge driver in 2021.
Other deals are in place.
Co-Packing Agreements Drive Expected Revenue Growth
This month, West Coast Co-Packer was named by PAO Group, Inc. (OTC Pink: PAOG) to be the co-packer for its CBD RELAX-RX nutraceutical product. That news sent ALKM shares soaring, with investors eyeing that product’s potential to serve a massive anxiety and depression market. Investors may be on to something as CBD RELAX-RX targets an anxiety and depression treatment market expected to become a more than $18 billion market opportunity by 2025. Even today, that market is a roughly $10 billion segment where demand for better and safer standards of care is high. Notably, PAOG is making substantial progress in getting its products to market.
That deal with PAOG enhances the business relationship. Alkame is already helping PAOG develop and produce a variety of CBD nutraceuticals to treat multiple patient indications. The most valuable and near-term prize could come through its co-packing agreement of RespRx, a CBD-based therapeutic targeting issues associated with Chronic Obstructive Pulmonary Disorder (COPD). The commercialization of that product, which PAOG suggests could happen in 2021, could push ALKM valuations exponentially higher.
The company’s advances in its proprietary functional water technology are also in play. There, ALKM announced it has streamlined and improved its water manufacturing processes, resulting in fluoride-free, alkaline water with a lower oxidation-reduction potential (ORP) and its highest-ever oxygen content. The result is a “good-for-you” water that has been shown to aid in lactate clearance after exercise, toxin removal, and decreased recovery times. That program could offer new revenue streams through licensing, partnership, and joint venture strategies.
Best of all, each program can be quickly accretive to revenues. And at sub-penny prices, the share price appears to have substantially undervalued the assets.
But, its co-packing deal with Puration, Inc. could be its most near-term value-driver.
Expanding Cu rent Partnerships
There, ALKM, again through its wholly-owned subsidiary, West Coast Co-Packer, Inc., is expanding its agreements with Puration, Inc. (OTC Pink: PURA) to enhance its services as the bottler of EVERx CBD-infused Sports Water. That product is already a market winner, with PURA announcing that sales of EVERx CBD-infused sports water should surpass $2 million in 2020. Additional growth in 2021 is also expected.
Moreover, ALKM announced taking steps to strengthen the partnership and collaborate to market multiple new CBD-infused consumer products, including a CBD-infused liquid sugar and a CBD pet food supplement. Additional products in the development stages include CBD-infused consumer products and hemp-derived beverages and edibles.
Best of all, with PURA already successful in the market with EVERx, adding additional SKUs could happen quickly. And that would immediately benefit ALKM. Thus, revenue growth could be near-term and substantial. Best of all, buying at these levels offers a discount to 52-week highs despite the company being better positioned to capitalize on multiple opportunities compared to earlier this year.
Moreover, with the inherent value from its more than ten subsidiaries, the broader story of ALKM needs to be better understood. To that point, ALKM has multiple shots on revenue-generating goals and has diversified its strategies to benefit from specialized market opportunities. And that makes ALKM attractive at these levels.
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