MPX Bioceutical is a double, says Echelon Wealth

Record revenue in March for MPX Bioceutical Corp. (MPX Bioceutical Stock Quote, Chart, News: CSE:MPX) is a confidence boost that the cannabis company will be able to follow through on its expansion plans, says Russell Stanley, analyst with Echelon Wealth Partners, who on Tuesday reiterated his “Speculative Buy” rating and $1.40 price target for MPX.

Early in March, MPX announced US$15 million in new acquisitions including medical marijuana cultivation and dispensary operations in the state of Arizona, a move which increased the company’s presence in Arizona and added to its already-established cannabis businesses in Nevada, Massachusetts and Maryland.

The acquisitions are already contributing to the company’s topline, according to MPX, which on Tuesday announced that its Arizona assets recorded month of March sales of cannabis and cannabis concentrates of $5.2 million, a new high for the company.

“With three operating dispensaries, two cultivation and two concentrate production facilities under management in the Greater Phoenix area, MPX is providing high quality cannabis-based medicines to an ever-increasing number of patients,” says chairman, president and CEO W. Scott Boyes in a press release. “The Arizona Department of Health Services has reported that the number of card-holding cannabis patients increased by 33 per cent during the 12 months ending February 2018, so the market size continues to expand, and we are working diligently to be able to service that growth.”

Stanley says the robust monthly sales could mean a possible upside to his forecasts.

“Management highlighted that $5.2 million/month in Arizona would imply run-rate sales above $60 million/year from Arizona alone. Our model anticipates Arizona to contribute roughly half of the $96.9 million in sales we are forecasting for MPX in F2019 (the year ended March 2019). Run-rate sales of $60M would surpass our expectations for the state, indicating possible upside to our revenue estimates there,” says the analyst in a note to clients on Tuesday.

“We also note a $60 million run-rate implicitly (and conservatively) assumes zero-growth,” he says. “So even on a forward-looking basis and assuming zero-growth, Arizona’s March sales appear strong. Management also noted that retail pricing and margins remain attractive, another positive. MPX is set to soon open its fourth dispensary Arizona, and its expanded production facility is expected to come online later this month.”

Stanley is maintaining his current estimates pending additional detail on the sales figures but notes that MPX currently trades at 7.4x his 2020 EV/EBITDA estimate, a 26 per cent discount to its sub-$1 billion market cap peers and a 32 per cent discount to other US cannabis operators.

The analyst’s $1.40 target price represents a projected return of 100 per cent at the time of publication.

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