The Canadian cannabis stocks on our list trade at a sizable discount on an EV/Fully-Funded Capacity basis
SmallCapPower | August 20, 2019: Funded Capacity is used to approximate future cannabis production that has been fully funded to be constructed or operated (most are not fully constructed/operating). Investors use EV/Fully-Funded Capacity to help value a cannabis company. A more attractive investment will have a lower EV/Funded Capacity. Today we have weeded out four Canadian cannabis stocks strictly with Canadian operations that trade at a discounted EV/Fully-Funded Capacity. For reference the average ratio was 11.7x.
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*Share prices as at close August 16, 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) – $1.60
Cannabis
WeedMD is a Canadian federally-licensed cultivator and distributor of cannabis and cannabis extracts for medical and recreational markets. As of now, the Company owns and operates two licensed facilities: 1) in Aylmer, Ontario, a 26,000 sq. ft. facility and; 2) a 158-acre property located in Strathroy, Ontario, which also includes a 616,000 sq. ft. greenhouse facility. Overall, WeedMD has 136,000 sq.ft of licensed production space with 150,000 kg of fully-funded capacity. Additionally, the Company is expecting to expand its footprint to more than 550,000 sq.ft. of indoor and greenhouse production space by the end of 2019. On May 31, 2019, the Company received approval for 27 acres (1.1M sq.ft) of outdoor cultivation space. On August 14, 2019, the Company announced that 40 of its medical cannabis strains were included in the completion of the first phase of TruTrace Technologies’ medical cannabis verification pilot project with Shoppers Drug Mart. Visit the Company’s corporate website for more information.
- Market Cap: $183.0 Million
- YTD Return: 21%
- Enterprise Value: $200.5 Million
- Fully Funded Production Capacity: 150,000 kg
- EV/Fully Funded Production: 1.3x
Organigram Holdings Inc. (TSXV:OGI) – $6.82
Cannabis
Organigram is a licensed producer of cannabis and cannabis-derived products in Canada for the recreational and medical market. The Company has a strong brand portfolio that includes The Edison Cannabis Company, Ankr Organics, Trailer Park Buds and Trailblazer. Organigram’s main facility is located in Moncton, New Brunswick. On July 26, 2019, the Company announced that it entered into an advance payment and purchase agreement with 703454 N.B. Inc., through which Organigram will pre-fund hemp purchases to receive access to, at most, 60,000 kg of dried hemp flower that is expected to be harvested in Calendar 2019 for extraction into CBD isolate. The Company reported its Q3/19 financial results on July 15, 2019, which showed net revenue of $24.8M through sales of about 3,926 kg of dried flower and 5,090L of oil. This is down 7.8% when compared to its Q3/18 revenue of $26.9M. Visit the Company’s corporate website for more information.
- Market Cap: $1,065.1 Million
- YTD Return: 39%
- Enterprise Value: $1067.4 Million
- Fully Funded Production Capacity: 200,000 kg
- EV/Fully Funded Production: 5.3x
The Flowr Corporation (TSXV:FLWR) – $2.92
Cannabis
The Flowr Corporation operates a 16,000 sq.ft indoor production facility in Kelowna, British Columbia, which is capable of producing at an annual capacity of 3,100 kg. The facility is designed for an “enhanced sea-of-green” growing style that uses equal-sized plants to target maximum yields and produce the highest-quality products. The Company’s Kelowna facility is currently under progress, with a projected production capacity of 61,750 kg in 2021E. On August 15, 2019, the Company announced its Q2/19 financial results, which showed gross revenue of $2.8M and net revenue of $2.2M. Additionally, the Company experienced a 61% increase in grams sold when compared to Q1/19. Flowr announced on July 30, 2019, that it received approval from Health Canada to export clones from its Kelowna Campus to Portugal. Visit the Company’s corporate website for more information.
- Market Cap: $293.3 Million
- YTD Return: -34%
- Enterprise Value: $301.3 Million
- Fully Funded Production Capacity: 50,000 kg
- EV/Fully Funded Production: 6.0x
Aleafia Health Inc. (TSX:ALEF) – $1.14
Cannabis
Aleafia Health is a vertically-integrated cannabis health and wellness company. The Company operates in four major business segments: 1) Cannabis Cultivation & Products; 2) Health & Wellness Clinics; 3) Cannabis Education and; 4) Consumer Experience with eCommerce. Operations are conducted from three cultivation facilities owned by the Company, which are comprised of: 1) Port Perry Facility, which is 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 July 15, 2019, the Company announced it secured a Health Canada licence amendment to increase its outdoor cultivation area at Port Perry from 292,000 sq.ft to over 1.1M sq.ft. Currently, the Company serves 60,000 medical patients. On August 14, 2019, the Company reported its Q2/19 financial results, which showed record revenue of $4M, an increase of 159% when compared to the previous quarter. Additionally, the Company strengthened its balance sheet with about $58M of cash on hand as of June 30, 2019. Visit the Company’s corporate website for more information.
- Market Cap: $313.2 Million
- YTD Return: -21%
- Enterprise Value: $302.6 Million
- Fully Funded Production Capacity: 138,000 kg
- EV/Fully Funded Production: 2.2x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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