Enthusiasm about the cannabis industry has known no bounds among Israeli investors in recent months, with share prices of companies soaring as soon as they announced their entry into the field. Another beneficiary is veteran Israeli security company Magal Security Systems Ltd. (Nasdaq: MAGS; TASE: MAGS), controlled by FIMI Opportunity Funds and managed by CEO Dror Sharon. Sources inform "Globes" that Magal has begun providing rigorous security planning for cannabis growers in accordance with the required standards. Magal acquired experience in the Canadian cannabis market, where it secures cannabis fields of local producers. As of now, the market is fairly small for Magal, but could be an interesting growth engine for the company. Magal's orders from this sector in Canada total $2 million to date, most of which it has already filled.
Magal provides a comprehensive solution for cannabis growers, including defense systems for fences, entry control, video cameras and analytics, break-in and warning systems, and gate control. All of these are connected to a central command and control system. Other capabilities can be added to the system, including a connection to agricultural control systems and distress systems. The company also markets a security robot that it developed, and some farm owners are showing interest in it as a substitute for human patrols - a requirement for cannabis growers in some countries.
Every country has a standard establishing security norms for a cannabis farm, and most of the security requirements are stringent. For example, according to circular issued by the Ministry of Health a year ago, "Security Under Proper Conditions for the Cannabis Supply Chain for Medical Use," threats in this sector include involvement of criminal groups, theft, and unauthorized use. Every site, including cannabis growing farms, requires special approval in order to obtain a cannabis license. Security equipment must be installed and operated 24/7 all year round. Requirements include a perimeter camera system, identification system, etc.
A law authorizing and regulating cannabis exports was passed on its second and third Knesset readings earlier this week. The law budgets supervision of the cannabis industry by the Ministry of Public Security. This law does not constitute official approval of exports, which requires a cabinet resolution.
Magal's market cap is $98 million. The company supplies products and carries out projects in the security sector for government authorities, companies, and large events. Magal made a $3 million net profit on revenue totaling $66.5 million in January-September 2018, 61% more than in the corresponding period last year, compared with a $7.2 million loss in January-September 2017.
Published by Globes, Israel business news - en.globes.co.il - on December 27, 2018
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