MPX Bioceutical has an 82 per cent upside, Echelon Wealth says

Ahead of its fourth quarter fiscal 2018 financials next week, MPX Bioceutical Corporation (CSE:MPX) has announced the opening of another medical cannabis dispensary, this one in Bethesda, Maryland.

Analyst Russell Stanley of Echelon Wealth Partners regards the news as a positive. In an update to clients on Tuesday, Stanley reiterated his “Speculative Buy” recommendation and 12-month target price of $1.40 per share.

MPX, which operates a management, staffing and logistics business for cannabis enterprises under the Health for Life brand in four US states, along with a cultivation and production facility in Ontario, announced on Tuesday that it had received licensing approval from the Maryland Medical Cannabis Commission to open a dispensary, to be operated under its Health for Life brand.

“With the opening of the Health for Life Bethesda dispensary, we are pleased to further strengthen our first-mover advantage in the state,” said W. Scott Boyes, Chairman, President and CEO, in a statement. “We have received a warm welcome from local business owners and the wider Bethesda community and look forward to serving patients, providing jobs and contributing to the local economy.”

Stanley notes that with a population of 6.1 million, Maryland has 31,984 certified medical cannabis patients as of June 28 and that while 102 companies have so far applied for dispensary licenses, only 22 have been issued as of July 3, making MPX an early entrant into the market.

Recenlty, MPX completed a US$40 million secured convertible loan, due May 2021, but Stanley says that he’s holding off on revising his price target until the company’s fourth quarter results are in.

“Our formal estimates [for Q4] are for revenue of $6.9 million and an EBITDA loss of $1.6 million,” says Stanley. “While our forecast shows top line growth of 53 per cent from the prior quarter, we believe our estimate should prove conservative given MPX reported that its Arizona assets produced revenue of $5.2 million in the month of March alone.”

For 2018, Stanley is predicting MPX will generate an Adj. EBITDA loss of $2.9 million on revenue of $20.2 million, while for 2019, he sees MPX producing an Adj. EBITDA of $21.2 million on a topline of $96.9 million.

The analyst’s price target stems from a 14.0x fiscal 2020 EBITDA estimate and represents a projected return of 82 per cent at the time of publication.