The Canadian marijuana stocks on our list trade at a discount to EV/Planned Capacity Expansion multiples
SmallCapPower | November 2, 2017: As Licensed Producers continue to roll out and execute on expansion plans in anticipation of the legalized recreational market in Canada next year, marijuana stocks have taken off. The Canadian marijuana stocks covered below trade at a significant discount to their peers, trading at EV/Planned Capacity Expansion multiples ($ per gram) ranging between $3.24 and $7.33, as opposed to a peer average of $10.91.
Supreme Pharmaceuticals Inc. (TSXV:FIRE) – $1.38
Pharmaceuticals
Supreme Pharmaceuticals is a Canada-based licensed producer of medical marijuana. The Company’s primary asset is 7ACRES, which currently operates a 40,000-square foot facility that produces 5,000 KG per year. The Company is also developing a 342,000-square foot facility at 7ACRES that anticipates 50,000 KG of annual production.
- Market Cap: $269 Million
- EV/Planned Capacity Expansion: $4.8 per Gram
- YTD Total Return: -4.8%
Emerald Health Therapeutics Inc. (TSXV:EMH) – $1.60
Pharmaceuticals
Emerald Health Therapeutics is a Canada-based company currently developing production capacity for medical marijuana cultivation. The Company recently announced a 50/50 joint venture (called Pure Sunfarms) with Village Botanicals for the establishment of a large-scale production facility. Under the agreement, Village provided a 1.1 million square foot greenhouse facility (previously used for tomato cultivation), which will be retrofitted for the cultivation of cannabis. Emerald Health estimates that the initial facility could yield more than 75,000 KG of dried cannabis. The Company also has options to purchase an additional 3.7 million square feet of greenhouse space that are located next to the current facility being built.
- Market Cap: $150 Million
- EV/ Planned Capacity Expansion: $3.24 per Gram
- YTD Total Return: 23.1%
Cronos Group Inc. (TSXV:MJN) – $3.26
Pharmaceuticals
Cronos Group owns and operates two licensed producers of medical marijuana in Canada: Peace Naturals (medical) and In The Zone (recreational). The Company also actively seeks investment opportunities in companies that are licensed under Access to Cannabis for Medical Purposes Regulations (ACMPR) or that are actively seeking a license. Cronos plans to ramp up production at its Peace Naturals facility from the existing 5,000 KG to 40,000 KG before 2019. Furthermore, the Company formed partnership with Israeli entity Gan Shmuel to set up a low-cost production facility in Israel. The proposed facility is expected to produce 24,000 KG.
- Market Cap: $471 Million
- EV/Planned Capacity Expansion: $7.33 per Gram
- YTD Total Return: 120.3%
Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own units in any of the companies mentioned above.
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