MPX Bioceutical is undervalued, Echelon Wealth says

A new acquisition has Echelon Wealth Partners analyst Russell Stanley maintaining his bullish stance on MPX Bioceutical Corp. (MPX Bioceutical Corp Stock Quote, Chart, News: CSE:MPX).

This morning, MPX announced it had signed a letter of intent to acquire Peterborough-based LP Canveda for $3-million in cash, $15-million in stock and warrants.

“We have always considered a Canadian presence to be a critical component of our business strategy,” CEO Scott Boyes said. “While we have never intended to build out the massive cultivation facilities being constructed by some of the other Canadian licensed producers, we will be focusing on utilizing the advanced extraction and distillation processes developed by our U.S. operations to produce and market the MPX-branded, award-winning concentrates in Canada, commencing with high-quality cannabis oils, followed by the broader range of MPX products as they become permissible under ACMPR rules. We are also excited about the import/export opportunities available to Canadian LPs. We also expect that this acquisition will accelerate our ability to secure a licence to produce in Owen Sound and will be immediately accelerating its development. We intend to replicate, in Peterborough and in Owen Sound, and where permitted under Canadian regulations, our U.S. business model of vertical integration which includes production, manufacturing and, eventually, the retailing of our very strong brands to Canadians. We are currently exploring partnerships with potential operators of dispensaries in Western Canada which would provide an additional distribution channel for MPX products.”

Stanley says he views the pickup positively.

“Upon completion, the acquisition gives MPX a beachhead from which it can port its branded products from the United States into Canada, as well as pursue export opportunities, which we view positively,” the analyst says. “Further potential catalysts include acquisition announcements, updates on expansions in other states, and improved financial results.”

In a research update to clients today, Stanley maintained his “Speculative Buy” rating and one-year price target of $1.40 on MPX Bioceutical, implying a return of 56 per cent at the time of publication.

Stanley thinks MPX will generate EBITDA of negative $2.9-million on revenue of $20.2-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $21.2-million on a topline of $96.9-million the following year.