The Canadian cannabis stocks on our list have a discounted EV/Fully Funded Capacity ratio
SmallCapPower | June 14, 2019: Funded Capacity is the approximated future cannabis production that has been funded to construction or in operation (most are not fully constructed/operating). As such, EV/ Fully Funded Capacity can be used to help value a cannabis company. A more attractive investment will have a lower ratio. Today, after looking strictly at Canadian operations, we have discovered five Canadian cannabis stocks that trade at a discount on an EV/ Fully Funded Capacity basis. For reference the average ratio was 18.1x.
*Share prices as at close June 12, 2019, data obtained from S&P Capital IQ
*to calculate EV/ Fully Funded Production Capacity multiply EV by 1,000 and divide by Fully Funded Capacity
WeedMD Inc. (TSXV:WMD) – $1.58
WeedMD is a federally-licensed producer and distributor of recreational and medical cannabis products that owns and operates two facilities. 1) The first facility is located in Aylmer, Ontario and is 26,000 sq. ft., and 2) the second is a 158-acre greenhouse and outdoor facility situated in Strathroy, Ontario. Currently, the Company has 136,000 sq. ft of indoor licensed production space in total among its facilities. WeedMD is expecting to expand its footprint to more than 550,000 sq. ft. of indoor and greenhouse production space by the end of 2019. The Company also has received approval on May 31, 2019 for 27 acres (1.1M sq. ft) of outdoor cultivation space. On June 10, WeedMD began planting 20,000 clones and is expected to complete planting by June 14, 2019. The Company is expecting to complete the harvest by Fall 2019. This follows an announcement from June 5, 2019, where the Company announced the launch of its first adult-use brand Color™ Cannabis, the brands products that includes a variety of strains in varying format options. The new product formats include pre-rolls, oils and gel capsules, among others that are still in development.
- Market Cap: $180.7 Million
- YTD Return: 20.6%
- 90-Day Average Daily Volume (1,000): 531
- Enterprise Value: $199.3 Million
- Fully Funded Production Capacity: 150,000kg
- EV/Fully Funded Production Capacity: 1.3x
Aleafia Health Inc. (TSX:ALEF) – $1.31
Aleafia Health is a vertically-integrated cannabis company that focuses on health and wellness products. The Company has four primary business units: 1) Cannabis Cultivation & Products; 2) Health & Wellness Clinics; 3) Cannabis Education and; 4) Consumer Experience with eCommerce, retail distribution and provincial supply agreements. The Company holds three cultivation facilities that are comprised of 1) Port Perry Facility, an indoor grow that is licensed and fully operational, 2) the Niagara Facility, which is a greenhouse in a plant-ready state that is waiting for a Health Canada cultivation license, and 3) the Paris Facility, which is a 25,000 sq.ft facility that is federally licensed for cultivation, processing and sale of medical and recreational cannabis. On June 13, 2019, Aleafia Health completed its planting of its first outdoor crop. Aleafia propagated 13,000 starter clones that have been bred specifically for outdoor cultivation at its Paris Indoor & Processing facility.
- Market Cap: $359.9 Million
- YTD Return: -6.3%
- 90-Day Average Daily Volume (1,000): 1,460
- Enterprise Value: $344.2 Million
- Fully Funded Production Capacity: 138,000 kg
- EV/Fully Funded Production Capacity: 2.5x
Aphria Inc. (TSX:APHA) – $9.61
Aphria produces and sells medical and adult-use cannabis-derived extracts in Canada. The Company has a Leamington greenhouse facility that has 1,100,000 sq. ft. The Company currently has supply agreements with all Provinces and the Yukon and has operations in Germany, Italy, Malta, South America, Lesotho and Australia. On June 7, 2019, the Company announced an agreement with San Francisco-based PAX Labs, designer of premium cannabis vaporization devices, that will allow Aphria to sell cannabis extracts in pods designed for use with PAX’s ERA device and platform. The Company announced it finished the German tender process and gained the fifth cultivation license in Germany. Aphria is building an indoor grow facility in Neumünster that is over 86,111 sq. ft and is currently working on a GMP-certified cannabis vault in Bad Bramstedt for the import of cannabis flowers and oil from Canada, Australia and Denmark.
- Market Cap: $2,409.3 Million
- YTD Return: 21.9%
- 90-Day Average Daily Volume (1,000): 3,064
- Enterprise Value: $2,379.2 Million
- Fully Funded Production Capacity: 255,000 kg
- EV/Fully Funded Production Capacity: 9.3x
Supreme Cannabis Company Inc. (TSX:FIRE) – $1.76
Supreme Cannabis Company is a Canada-based company that focuses on selling to the wholesale sector for the medical cannabis market in Canada. The Company’s subsidiary, 7ACRES, has a 440,000 sq. ft. cultivation facility outside of Toronto. The Company announced its Q3/19 financial results on May 13, 2019, which showed Q3 net revenue of $10 Million, which is a 382% increase from $2.1 Million in Q3 2018 and a 29% increase from $7.7 Million in Q2/19. Supreme announced on May 16, 2019, that it is going to acquire, for approximately $48 Million, premium wellness cannabis company Blissco. On June 7, 2019, the Company announced it signed a partnership agreement with PAX Labs to be one of four initial supply partners with the Company.
- Market Cap: $517.6 Million
- YTD Return: 28.0%
- 90-Day Average Daily Volume (1,000): 683
- Enterprise Value: $518.1Million
- Fully Funded Production Capacity: 50,000 kg
- EV/Fully Funded Production Capacity: 10.4x
CannTrust Holdings Inc. (TSX:TRST) – $6.97
CannTrust offers medical and recreational cannabis products in Canada. Currently, the Company serves more than 70,000 medical patients. The Company presently has a 50,000 sq. ft hydroponic facility in Vaughan, Ontario and is expanding to a 430,000 sq. ft cultivation facility in the Niagara area. On May 14, 2019, the Company released its financial results for Q1/19. CannTrust recorded quarterly revenue of $16.9 Million, which is a 115% increase from Q1/18.
- Market Cap: $984.2 Million
- YTD Return: 1.5%
- 90-Day Average Daily Volume (1,000): 2,066
- Enterprise Value: $996.6 Million
- Fully Funded Production Capacity: 100,000 kg
- EV/Fully Funded Production Capacity: 10.0x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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