HEXO’s NYSE listing is a strong move, Beacon Securities says

A plan to list its shares on the NYSE American exchange is a strong one for HEXO (HEXO Stock Quote, Chart TSX:HEXO), Beacon Securities analyst Russell Stanley says.

On December 21, HEXO announced it had filed an application to list on the NYSE American.

“This is a remarkable milestone for our company,” CEO Sebastien St-Louis said. “We committed to our shareholders that Hexo would seek a listing in the U.S. by the end of 2018 and I am proud to say that we delivered. We have a proven track record for our ability to execute and we will maintain it through our focus on developing and distributing innovative consumer-packaged cannabis products.”

Stanley says this development puts HEXO in some rare company.

“There are currently just five Canadian licensed producers listed on US exchanges, and they trade at an average of 61x EV/C2020E EBITDA based on consensus estimates (though we concede the range of multiples is considerable at 6x to 204x). We expect a NYSE listing to significantly broaden the investor audience for the stock, and with just a handful of US-listed companies available to investors, HEXO should also benefit from the scarcity factor.”

In a research update to clients Friday, Stanley maintained his “Buy” rating and one-year price target of $11.00 on HEXO, implying a return of 142 per cent at the time of publication.

Stanley thinks HEXO will generate Adjusted EBITDA of negative $3.9-million on revenue of $100.7-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $116.5-million on a topline of $315.9-million the following year.

“HEXO is now trading at 7x EV/C2020E EBITDA based on our estimates representing a 47% discount to the 14x at which the broad peer group grades, and a 78% discount to the 33x at which larger cannabis companies trade ($1B+ market capitalizations),” the analyst adds.