ICC Labs has a big upside, GMP Securities says

No surprises in the Q1 results from licensed producer ICC Labs (ICC Labs Stock Quote, Chart, News: TSXV:ICC), says Martin Landry, analyst with GMP Securities, who in an update to clients on Monday reiterated his “Speculative Buy” rating and C$3.00 target price.

The first quarter of 2018 saw Uruguay- and Columbia-based cannabis producer ICC Labs generate revenues of $164,000 on an Adj. EBITDA loss of $1.5 million (all figures in US dollars unless noted otherwise.)

CEO Alejandro Antalich said the company continues to expand its footprint in the Latin American market at the same time as it works to access the European and Canadian markets. The company expects its CO2 extraction facility in Uruguay (with an expected capacity of 150,000 kg of dried flowers) to be ready by the end of July.

“As we near completion of our CO2 extraction laboratory (the first one of its kind in Latin America), we are combining operations in low cost jurisdictions with industrialized extraction in a GMP facility, and moving closer to our objective of supplying the global market with the pharmaceutical-grade and medicinal products at affordable prices,” said Antalich in a press release.

Landry says ICC’s Q1 financials came in-line with expectations and that they reflect the company’s status as still in the early stages of development. Nevertheless, the analyst makes note of ICC’s ability to garner letters of intent related to its production goals.

“ICC continues to develop channels for its products, with high potential LOIs such as the LOI with Eurofarma, which could accelerate ICC’s market penetration in Latin America given Eurofarma’s large sales force, and the LOI with CanPharma, which could open the lucrative German market,” says the analyst. “We would expect that once clients have been satisfied with samples provided by ICC, most of these LOIs will be converted into definitive agreements.”

The analyst has made slight changes to his estimates, calling for revenue and EBITDA for 2018 of $4.9 million (unchanged) and negative $3.6 million (was negative $0.5 million), respectively, and revenue and EBITDA in 2019 of $84.7 million (unchanged) and $20.8 million (unchanged), respectively.

Landry’s C$3.00 target represents a projected return of 120.6 per cent at the time of publication

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