International Cannabis Corp. is undervalued, GMP says

A deal that will bring International Cannabis Corp. (International Cannabis Corp. Stock Quote, Chart, News: TSXV:ICC) CBD extract products to the Brazilian market is getting the thumbs up from GMP Securities analyst Martin Landry.

This morning, International Cannabis Corp. announced an import/export agreement with a Brazilian company named Brasliv that will see the latter purchase a minimum of 180,000 30-millilitre bottles of Bidiol CBD oil per year for distribution for medicinal purposes.

“This agreement constitutes a major milestone for the CBD industry and ICC. Brazil is the sixth most populous country in the world (at 208 million) and major new market for CBD that is only just emerging,” said CEO Alejandro Antalich. “Brazil is extremely innovative in their use of CBD oil products for medical treatments. We are very excited about the possibility of accessing this prosperous market due to our many competitive advantages. Firstly, Uruguay, home to ICC’s operations, neighbours Brazil and the two countries enjoy a robust trade relationship across a variety of good and services. Second, as both countries form part of the Mercosur commercial block, this will allow for the seamless transportation of goods across borders. Exports from Uruguay to Brazil in 2016 were for approximately $1.2-billion (U.S.). Finally, because Brazil’s regulatory regime does not permit cannabis production, we expect Brazil to rely on the importation of CBD oil, making this a key market for ICC. Low transport costs, geographic advantages, a pre-established commercial framework and the size of the Brazilian market make this deal a very promising and potentially transformative opportunity,” commented , chief executive officer of ICC.”

Landry says this deal makes a lot of sense.

“We see this news as a very positive development for ICC, providing much needed visibility on the company’s ability to capture global export opportunities. We view ICC’s cost advantage and strategic location as key drivers to capitalize on the rapid global growth of CBD,” he says.

In a research update to clients today, Landry maintained his “Speculative Buy” rating and one-year price target of $2.50 on International Cannabis Corp., implying a return of $145.1 per cent at the time of publication.

Landry thinks ICC will generate EBITDA of negative $3.0-million on revenue of $800,000 in fiscal 2017. He expects those numbers will improve to EBITDA of positive $200,000 on a topline of $16.1-million the following year.