In light of the news, the analyst has reiterated his “Speculative Buy” rating for the company with a one-year target price of $16.75.
Licensed cannabis producer CannTrust operates indoor growing facilities in Vaughan, Ontario, along with a massive greenhouse space on 46 acres in the Niagara region. On Wednesday, the company announced it has closed $15 million in financing for its Niagara greenhouse facility, which will go towards CannTrust’s Phase 2 expansion to 180,000 square feet of growing space.
“Completion of this Facility gives us the ability to acquire a substantial share of the increased demand expected from the pending legislation to legalize the adult consumer recreational use of cannabis,” said Brad Rogers, President of CannTrust Inc., in a press release.
The move will be enough to at least double its current production capacity to 40,000 kg of dried cannabis a year, says Stanley, who says that CannTrust’s stock is attractive, especially in comparison with other marijuana companies.
“The stock is currently trading at 5.5x our 2019 EBITDA estimate [of $111.3 million],” says the analyst in a note to clients on Thursday. “Moreover, should yields outperform (e.g., 250 grams/SFT of footprint vs. 175 grams/SFT assumed), then our EBITDA estimate could approach $225M, and the stock is trading at less than 4x EBITDA. By comparison, the broad peer group adjusted average EV/C2019E EBITDA multiple is still well over 17x, while CannTrust’s closest peers trade at closer to 40x.”
The company has had a number of recent announcements, including earlier this week when management said it had received a Health Canada sales license for its Phase 1 250,000 sq/ft greenhouse space, along with reporting strong preliminary Q417 revenue numbers.
Stanley expects further updates from CannTrust in the near future on product development, Phase 2 expansion and the final Q417 results, coming in late March. The analyst reiterates his “Speculative Buy” rating with a target price of $16.75, representing an 88 per cent return at time of publication.
Comment