The closing of a new financing for WeedMD Inc. (TSXV:WMD) has Mackie Research Capital analyst Greg McLeish raising his price target on the company’s stock.
On January 11, WeedMD announced the closing of a $34.5-million bought deal financing, underwritten by Eight Capital, Mackie Research Capital, and Haywood Securities. The company said it plans to use the proceeds in part to expand and retrofit its 14-acre Strathroy greenhouse and to purchase and further develop its Aylmer facility.
McLeish says this development will allow the company’s to quickly execute on an ambitious business plan.
“This $34.5 mm financing coupled with the company’s existing cash will result in a pro-forma cash position of $59 mm,” the analyst notes. “This strong cash position will will allow management to continue with its capital expansion plans, pursue strategic acquisitions, and address potential working capital requirements.”
In a research update to clients today, McLeish maintained his “Buy” rating on WeedMD, but raised his one-year price target on the stock from $3.00 to $4.00, implying a return of 53.8 per cent at the time of publication. The analyst explains that he arrives at his new target by applying an 11x EV/EBITDA multiple to his 2020 estimate and then discounted the result using a 15% discount rate.
McLeish thinks WeedMD will generate EBITDA of negative $4.3-million on revenue of $914,000 in fiscal 2017. He expects those numbers will improve to EBITDA of negative $1.02-million on a topline of $20.14-million the following year.