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Organigram Holdings is still undervalued, says GMP

OrganiGram Holdings

OrganiGram HoldingsA supply agreement with the province of New Brunwick is a strong vote of confidence in Organigram (Organigram Holdings Stock Quote, Chart, News: TSXV:OGI), says GMP Securities analyst Martin Landry.

On Friday, Organigram announced it had entered into a memorandum of understanding with the province of New Brunswick that will see the former supply a minimum of five-million grams of recreational marijuana a year to the latter.

“We are excited to enter into this MOU with the province,” said Organigram CEO Greg Engel. “The government of New Brunswick has established itself as a leader in the developing marijuana industry, working to ensure that the industry develops in a responsible and effective manner. New Brunswick’s stewardship on this file has been recognized throughout Canada and we are proud to work closely and support them as a strategic partner. We applaud the New Brunswick government’s efforts to foster an innovative, forward-thinking economic climate that supports cannabis as a driver of growth for New Brunswick-based businesses.”

Landry says he likes this deal because it expresses a vote of confidence in Organigram, because the large quantity provides visibility, and because the pricing appears in-line with expectations.

“Organigram has had challenges in the last 12 months dealing with production issues and recalls,” the analyst notes. “Hence, this agreement is a strong vote of confidence in the company’s ability to produce quality products at scale and could lead to agreements with other provinces.”

In a research update to clients today, Landry maintained his “Buy” rating and one-year price target of $4.00 on Organigram, implying a return of 50.9 per cent at the time of publication.

Landry thinks Organigram will post an EBITDA loss of $600,000 on revenue of $8.9-million in fiscal 2017. He expects those numbers will improve to EBITDA of positive $10.7-million on a topline of $36.8-million the following year.

About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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