Curaleaf Holdings is Becoming a U.S. Cannabis Juggernaut

Curaleaf Holdings, Inc. (CSE:CURA) announced recently a deal to acquire GR Companies Inc, increasing the Company’s presence from 12 to 19 states

SmallCapPower | August 1, 2019: Curaleaf Holdings, Inc. (CSE:CURA) (OTCQX:CURLF), one of the Canada-listed U.S. cannabis stocks, is a multi-state cannabis operator (MSO) in the United States. As the largest U.S. cannabis company by market cap, Curaleaf positions itself in highly-populated, limited-license states. Currently, CURA operates in 12 states with 48 dispensaries, 13 cultivation sites, and 12 processing sites. Curaleaf has a market cap of $5.1B and trades at 4.7x 2020E sales and 14.5x 2020E EBITDA, a premium to peers, which trade at 3.1x and 11.7x, respectively.

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Curaleaf has a strong presence throughout the United States, including the #1 market share in four highly-populated states. Curaleaf gives investors pure-play exposure to the United States cannabis market, the largest market in the world in terms of potential sales. In 2018, the U.S. had ~US$10.8B in legal cannabis sales, and this number is expected to increase to ~US$24.1B by 2025, according to Statista.

Curaleaf’s strategy involves establishing itself within highly-populated states with growing cannabis markets. The Company reports that it has the #1 market share in Oregon, California, Nevada, and Arizona, which account for over 80% of CURA’s revenue. These states have rapidly-growing populations of 4.2M, 39.6M, 3.1M, and 7.2M, respectively. Additionally, the Company has geographically diversified by expanding into eight other states. This should reduce CURA’s unsystematic risk relative to MSOs that are in one or a few states only.

Curaleaf Holdings is currently in a financial position that supports its growth initiative. The Company has had a flurry of acquisitions over the past year leading to its significant growth. Curaleaf plans on continuing its growth strategy through acquisitions, and its latest reported ~US$172.6M cash balance supports Curaleaf’s strategy. The Company currently has 45 operating stores and expects to have 70 stores operational by the end of 2019, with product distribution to more than 900 stores.

Operational Overview

State Nature of Operations
Arizona As of March 2019, Curaleaf operated four licensed dispensaries in the Phoenix area, which contains 122,000 of Arizona’s 189,000 patients. In May 2019, CURA acquired the exclusive rights to operate the Emerald dispensary, the only dispensary in the town of Gilbert. Recently, announced on June 27, the Company also acquired Glendale Greenhouse and Phytotherapeutics Management Services LLC, which is expected to provide CURA with an additional 20,000 sq. ft production facility, and two dispensaries.
California In March 2019, the Company acquired Eureka Investment Partners LLC, a California-based operator with a cultivation facility in the Salinas Valley and three dispensaries under development across the state. In May, CURA announced an agreement to acquire Cura Partners, a provider of premium cannabis and hemp oils. With its THC products sold in more than 900 retailers, it is one of the leading cannabis brands in California, Arizona, Oregon, and Nevada.
Connecticut The Company began wholesaling in Connecticut in October 2014 and now sells to all nine of the state’s operational dispensaries. Curaleaf operates a 40,000 square foot facility within Connecticut, which includes cultivation, and supercritical CO2 extraction.
Florida Curaleaf holds one of the original six medical cannabis licenses issued in the state. Curaleaf currently operates an 18,000 square foot indoor growing facility, a 278,000 square foot greenhouse growing facility, and 25 dispensaries within the state.
Maine CURA provides management services to two of the medical cannabis licensees in the state: Maine Organic Therapy and Remedy Compassion Center.
Maryland In January 2019, Curaleaf entered into an option purchase agreement to purchase all of Town Center Wellness LLC, which operates the Elevate Takoma dispensary. Currently, Curaleaf operates four branded stores within Maryland.
Massachusetts Within Massachusetts, Curaleaf operates two dispensaries, a 104,000 square foot cultivation facility, and a 75,000 square foot cultivation facility through its acquisition of Alternative Therapies Group.
Nevada CURA has acquired a 10,000 square foot licensed indoor cannabis cultivation facility as well as a licensed dispensary, both located in Las Vegas, Nevada. These businesses are licensed for both medical and recreational sales.
New Jersey The Company manages Curaleaf NJ Inc, a not-for-profit entity, with an integrated medical cannabis license. CuraleafNJ owns a property that includes 46,890 square feet of cultivation space and an adjacent 12,000 square foot facility, of which 4,000 square feet is utilized for dispensary operations.
New York Curaleaf has the right to open four dispensaries in the state of New York. The Company operates four dispensaries located in Newburgh, Plattsburgh, Queens, and Nassau County, New York. CURA also has a 72,000 square foot cultivation and manufacturing facility in Ravena, New York.
Ohio The Company has a processing license in Ohio and is currently building out the facility. In May 2019, CURA entered into an agreement granting it an option to acquire Ohio Grown Therapies, a holder of one of the 16 Level 1 cultivation licenses and one processing license.
Oregon Curaleaf Holdings holds a producer license and a processing license for recreational cannabis in Oregon and operates a 20,000 square foot outdoor cultivation center and an adjacent 17,000 square foot indoor facility.
Pennsylvania CURA has partnered with an accredited medical school to obtain a clinical registrant license in Pennsylvania, though it is not currently licensed. To support its expected presence in Pennsylvania, the Company has leased a 49,200 sq. ft production facility in King of Prussia.

Further Company Information

CURA’s acquisition of GR Companies Inc solidifies the Company’s position as largest U.S. MSO. On July 17, 2019, Curaleaf Holdings announced that it has signed a definitive agreement to acquire GR Companies Inc, the largest private vertically-integrated MSO, in a cash and stock deal valued at ~US$875M. As a market leader throughout the Midwest, GR has a portfolio of 61 dispensary licenses, with 20 operating today, and 17 cultivation and processing licenses that will substantially accelerate Curaleaf’s expansion across the nation. GR also has a strong presence in large markets that Curaleaf does not currently operate in, increasing Curaleaf’s presence from 12 to 19 states. The combined company will have 131 dispensary licenses, 68 operational locations, 20 cultivation sites, and 26 processing facilities. Upon completion of the proposed transaction, Curaleaf will have solidified itself as the largest cannabis company in the U.S., with access to a total population of ~177M people.

Curaleaf Holdings Inc stock currently trades at a market capitalization of US$5.1B. Curaleaf trades at 4.7x 2020E sales and 14.5x 2020E EBITDA, a premium to peers, which trade at 3.1x and 11.7x, respectively.

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