More expansion news from cannabis company MPX Bioceutical Corporation (CSE:MPX), which just increased its presence in Arizona’s marijuana industry.
That calls for a target price raise, says analyst Russell Stanley with Echelon Wealth Partners, who reiterates his “Speculative Buy” rating for MPX with a new target of $1.40 per share.
On Monday, MPX announced the purchase of vertically integrated cannabis operations in Arizona including medical marijuana cultivation and dispensary operations for the aggregate of US$15 million.
“This acquisition represents a solid addition to our industry and presence in Arizona, a state that offers MPX one of the best-regulated, yet industry-supportive markets in the country,” said W. Scott Boyes, MPX’s Chairman, President and CEO in a press release. “The entities being acquired have recorded trailing 12-month revenues of US$15 million and EBITDA of approximately US$3.5 million, and its results will be immediately accretive to MPX earnings. Furthermore, the acquired companies are well-managed and will allow both parties to share best practises and benefit from the ability to share purchase economies.”
In a client update on Monday, Stanley says the acquisitions will pair up well with MPX’s existing operations, which along with the Arizona operations include cannabis enterprises in Nevada, Massachusetts and Maryland.
“This purchase doubles the Company’s cultivation capacity in Arizona, and includes a dispensary location called ‘The Holistic Center’ located in Phoenix,” says the analyst. “Including the Company’s two existing dispensaries, and a third in development, MPX now has four dispensaries in Arizona, a market with almost 157,000 registered patients on a population of just 6.9 million. Finally, the transaction adds cannabis products with strong mid-market penetration in the state, representing a nice complement to the Company’s higher end Melting Point Extract product line.”
Stanley expects the acquisition to partially add to MPX’s Q4 2018 results (given the company’s March 31 FYE) with a full quarter contribution coming in Q1 2019, ending June 30. The analyst has adjusted his revenue and EBITDA estimates for 2018 to $20.2 million and -$2.9 million, respectively, for 2019 to $96.9 million and $21.2 million, respectively, and for 2020 to $153.8 million and $49.3 million, respectively.
Stanley has increased his valuation multiple from 13.5x to 14.0x EV/2020E EBITDA and increased his 12-month target price from $1.25 to $1.40, representing a projected return of 97 per cent as of time of publication.