Aphria Actions Could Unlock Some Shareholder Value

Aphria Inc. (TSX:APH) said it has realized a gain of about $8.8 million after selling its stake in Copperstate Farms LLC

SmallCapPower | July 11, 2018: Aphria Inc. (TSX:APH) announced recently that it has sold its ownership stake in Copperstate Farms LLC and Copperstate Farms Investors LLC for $20 million. The successful closure of its stake was announced on July 5, through which the Company realized a gain of about $8.8 million. Aphria’s original investment in Copperstate Farms was approximately $11.1 million.

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Shares of Aphria have likely been weighed down by its U.S. holdings as the Toronto Stock Exchange has, in the past, threatened to delist Canadian cannabis companies with operations in the United States as cannabis is still illegal at the federal level in that country.

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In another recent development, Aphria said it has signed a supply agreement with the Alberta Gaming, Liquor & Cannabis Commission (AGLC) by which the Company will provide high-quality cannabis and cannabis-derivative products for sale in Alberta’s adult-use market.

Aphria Chief Commercial Officer Jakob Ripshtein said, “We are thrilled to be working with such a strong partner that is equally committed to promoting responsible cannabis use. This important agreement enables Aphria’s adult-use brands to have a strong presence in Alberta’s dynamic retail landscape. Through our partnership with the AGLC, we look forward to providing access to our thoughtfully crafted portfolio of brands that were designed to meet the diverse needs of Alberta consumers.”

According to the terms of the agreement, the AGLC has placed an opening order of 870 kilogram to be supplied from across the full portfolio of Aphria’s adult-use brands and products, including dried flower, pre-rolls and cannabis oils. As and when other product categories, such as vapes and edibles, are authorized under the Cannabis Act, it is likely to be made for sale throughout the province, which will further enhance Aphria’s assortment of offerings in Alberta market.

Aphria CEO Vic Neufeld remarked, “As we prepare for legal sales in October, this agreement represents yet another key milestone in our progress as we make Canadian history. We are ready to meet the needs of Albertans as well as those across Canada with our annual production capacity that will reach 255,000 kg in early 2019. Additionally, we are prepared to service 100% of Alberta’s retailers from Day 1 through our recently announced partnership with Great North Distributors, in addition to supplying Alberta’s only legal online store for adult-use cannabis at www.albertacannabis.org.”

Aphria trades at a market capitalization of $2.75 billion with price-to-book multiple of 2.86x and EV/Revenue multiple of 75.40x.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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