Aphria gets price target raise at PI Financial

With a recent bought deal adding to an already impressive war chest, Aphria (Aphria Stock Quote, Chart, News: TSX:APH) is now the market leader in terms of funded capacity, says PI Financial analyst Jason Zandberg.

On February 24, Aphria announced that it had sold a total of 11.5-million shares at a price of $5.00 per share to raise $57.5-million. The company said the proceeds would be used to fund the expansion of its Part 4 expansion project and for strategic investments.

Zandberg says this latest round of financing puts Aphria over the top in a key metric.

“We believe Aphria is the MJ market leader in terms of funded capacity,” says the analyst. “Having recently closed a $57.5M bought deal financing, we estimate Aphria’s cash balance currently sits at around $130M – $160M. We estimate that Aphria’s total funded capacity is 61,000kg. This estimate includes current capacity of 2,800kg plus funded expansion plans – we have assumed Part 2 and 3 are funded and Part 4 expansion is partially funded. This funded capacity is the highest among the licensed producers in Canada.”

Zandberg says Aphria’s capacity after its Part 4 expansion will be impressive.

“After the Part 4 expansion is complete, Aphria will have a total greenhouse growing space of 1,000,000 sqft. and will be able to produce up to 70,000kg per annum implying yields of 70 grams/sqft above industry greenhouse average yields of 60 grams/sqft,” he says.

In a research update to clients today, Zandberg maintained his “Buy” rating, but raised his one-year price target on Aphria from $6.00 to $8.00. The analyst says the target raise is due to the increase in peer multiples and our EV/Funded Capacity valuation.

Zandberg believes Aphria will post EBITDA of $4.17-million on revenue of $20.2-million in fiscal 2017. He expects these numbers will improve to EBITDA of $14.9-million on a topline of $42.3-million the following year.