BMO Capital Archives - Green Market Report

Video StaffJune 1, 2018

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The big news this week was that California cannabis retailer MedMen began trading on the Canadian stock exchange (MMEN) . The company has a billion valuation, which has come under some criticism for being a bit frothy as compared to the current state of revenues. However, the company hasn’t reported any earnings since before the California stores came online so that picture could change quickly once the market sees those sales numbers. The stock has fallen 23% since it began trading and has endured withering comments from a site called equity guru as well as from many of the better-known marijuana stock traders.

There were some earnings out this week.

Golden Leaf Holdings (GLDFF) said first-quarter revenue soared, thanks to its 2017 acquisition of Chalice Farms and highlighted the progress it’s making in expanding its cannabis operations in California. Golden Leaf said its revenue jumped 42 % year-over-year to $3.2 million. It also generated $353,000 in gross profit, up from $238,000 in the year-ago quarter.

Emblem Corp. (EMMBF) reported that its revenues for the first quarter increased 41% to $1,277,000 in Q1 2018 from $903,000 in Q1 2017. Gross profits increased 304% to $182,000 compared to a gross loss of $89,000 for the same time period in the previous year.

Sunniva  (SNNVF) released its financial results with $5.2 million in revenue from its two subsidiaries, Natural Health Service Ltd. and FSD, which contributed $2.7 million and $2.5 million, respectively. Net loss for the period ended March 31, 2018, was $6.3 million as compared to $1.0 million during the period ended March 31, 2017.

Hiku (HIKU) reported revenue for the first quarter and it was relatively small, totaling C$246,143. The vast majority of that revenue was gobbled up by the retail cost of sales, which totaled C$202,431. The company managed to squeak out a gross profit of C$15,554. Overall, Hiku posted a net loss of $9.1 million for a loss per share of eight cents versus last year’s loss per share of one cent.

On The Acquisition Front

Canopy Growth Corporation (CGC) is staking a claim in the African medical cannabis market. On May 30, 2018, the company announced that it has acquired Daddy Cann Lesotho PTY Ltd., which trades under the name Highlands.

And in the research world…..

BMO Capital Markets, a North American financial services provider, has initiated coverage on both Aphria Inc. (APHQF) and Canopy Growth (CGC) with a rating of Outperform.


William SumnerMay 29, 2018
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BMO Capital Markets, a North American financial services provider, has initiated coverage on both Aphria Inc. (APHQF) and Canopy Growth (CGC) with a rating of Outperform.

According to the report released on May 28, 2018, both companies stand to benefit from a first mover advantage in initial recreational markets as many cannabis companies in Canada do not have the inventory or production capacity to meaningfully participate in the market while both Aphria and Canopy do.

In the long term, BMO believes that cannabis cultivation will become a commoditized activity and that oversupply will become an issue. Although a majority of cannabis brands hope to counter this through the development of brands or through the expectation that they will become a low-cost producer.

The Aphria Opinion

BMO expects that most cannabis firms will not be able to generate sustainable margins at scale, but they do believe that Aphria will be one of the few that can. The report points to the extensive commercial greenhouse cultivation experience held by the company’s management team and to the inherent infrastructure and greenhouse culture in Leamington, Ontario, where the company is based.

Aphria’s target price is $17 and is based on a projected enterprise value that is 17x BMO’s Base Case Fiscal 2020 EBITDA estimate; which in turn was based on the assumption that Aphria’s facility expansions would only be at 65% of its full production capacity by 2020.

The Canopy Growth Opinion

Canopy, on the other hand, is well positioned to become a global brand leader. In addition to the company’s first-mover advantage, the company also has a head start in the international market; establishing cultivation centers in hub regions like Denmark for the future export of medical cannabis to Germany and possibly the rest of Europe.

Canopy’s target price is $45 and is based on a projected enterprise value that is 20x BMO’s Base Case Fiscal 2020 EBITDA estimate. Like Aphria, this figure is based on the assumption that the company would only be at 65% of its full production capacity by 2020, even though both companies expect to reach 100% by that date.

MedMen Goes Public

In related news, MedMen Enterprises announced today that its stock would begin trading today on the Canadian Securities Exchange at 11 a.m. eastern time under the ticker symbol “MMEN”. The company will raise roughly C$143 million or $110 million from the listing, giving MedMen an enterprise valuation of C$2.14 billion or $1.65 billion.


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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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