iAnthus Capital has 120 per cent upside, Beacon Securities says

US cannabis company iAnthus Capital Holdings (iAnthus Capital Stock Quote, Chart CSE:IAN) recently announced an agreement to purchase retail cannabis company MPX Bioceutical, a deal the benefits of which are showcased by MPX’s opening of a third dispensary in Maryland, says Beacon Securities analyst Russell Stanley, who on Tuesday reiterated his “Buy” recommendation and C$12.50 target price for iAnthus.

Earlier this month, iAnthus Capital —which owns and operates licensed cannabis cultivation, processing and dispensary facilities in the United States— announced an agreement to acquire MPX Bioceutical Corporation, a medical marijuana operation based in Arizona, in an all-stock transaction.

Stanley says MPX’s expanding presence in Maryland highlights the complementary nature of MPX’s assets for iAnthus.

“As discussed in our Resuming Coverage note last Thursday, the acquisition of MPX adds its Arizona operations (generating approximately $50 million in annualized reve-nue, based on the June quarter results), as well as complementary growth assets in Mar-yland and Nevada, and additional licenses in Massachusetts. We view these as a strong fit with iAnthus’ current core assets in Florida, New York and Massachusetts,” says Stanley in a client update

“We continue to view IAN as an overlooked and undervalued multi-state operator (MSO) with a strong geographic footprint (ten states with an aggregate population of 112 million, pro forma the MPX transaction) and a compelling valuation,” says the analyst.

Stanley says IAN currently trades at approximately 8.0x his 2020 EBITDA estimate, which compares to US-focused cannabis companies trading at an average of 9.5x 2020 EBITDA estimates and to Canadian market-focused cannabis companies trading at 30.6x.

The analyst thinks IAN will generate revenue and Adjusted EBITDA in 2019 of $201-million and $37-million, respectively, and revenue and Adjusted EBITDA in 2020 of $336-million and $116-million, respectively. (All figures in US dollars unless noted otherwise.)

Year-to-date, IAN is up 100 per cent as of midday trading on Wednesday. Stanley’s C$12.50 target represents a projected return of 120 per cent at the time of publication.