Tweed Marijuana is undervalued, says M Partners

Tweed Marijuana (Tweed Marijuana Stock Quote, Chart, News: TSXV:TWD) is moving its expansion plans ahead as promised and is on pace to receive a full license to produce and sell near the end of this year, says M Partners analyst Daniel Pearlstein.

Yesterday, Tweed announced that the building permits for a 316,000 square foot expansion at its property in Southwestern Ontario had been issued. The company says that once approved by Health Canada its capacity will rise dramatically.

“Tweed’s focus is customercentric,” said CEO Bruce Linton. “In a market with a rapidly expanding customer base, the most customer-focused approach you can take is to build a large growing platform that keeps a diverse product line available to customers. The current phase of expansion under way at Tweed Farms will allow us to service additional clients who are choosing cannabis to manage a variety of symptoms.”

Pearlstein broke down his estimates on Tweed’s upcoming production.

“The timing for the additional rooms is as expected and our production estimates for our valuation year remain unchanged,” he said. “We maintain our 75 gram/plant yield estimate in 12 rooms at Smiths Falls as well as our estimates of 1,000 plants per room, four cycles per year. For Tweed Farms, we assume Tweed is growing on 65,000 square feet in three cycles per year with ~9,000 plants, 100 grams/plant for the summer cycle, 75 grams/plant for the spring cycle and 50 grams/plant for the winter cycle.”

The analyst says his fiscal 2017 revenue target of $29.3 million is based on 8200 full time patients.

In a research update to clients today, Pearlstein reiterated his “”Buy” recommendation and one year target of $2.75, implying a return of 40% at the time of publication.