CannTrust Holdings has a huge upside, says Beacon Securities

Vaughan, Ontario’s CannTrust Holdings (CannTrust Holdings Stock Quote, Chart TSX:TRST) announced on Tuesday that it has applied for a listing on the NYSE, a move that Beacon Securities analyst Russell Stanley calls a positive, while noting that with its share price lagging behind that of its closest peers, CannTrust is due for a win.

TRST is up over three per cent in trading on Tuesday as investors take in the news that the cannabis company could become the sixth Canadian pot co to list on a US exchange.

“CannTrust has firmly established itself as one of the top licensed producers in Canada with a global platform rooted in trust, science and innovation,” said CEO Peter Aceto, in a press release. “A listing on the NYSE is a natural step forward in our evolution as we look to broaden our investor base, increase the company’s exposure and expand our business on an international scale.”

Stanley, in a research update to clients Tuesday, said even as the announcement has not come as a surprise, it still demonstrates progress on the part of CannTrust.

“A US exchange listing would significantly expand the company’s profile and investor audience and should support meaningful multiple expansion for TRST,” says Stanley in a client update on Tuesday.

“We already view CannTrust as significantly undervalued. It currently trades at approximately 6x our 2020E EBITDA forecast, a 62 per cent discount to the 17x average for the broad peer group, and an 82 per cent discount to the 35x average amongst companies with a $1-billion-plus market capitalization (until the recent sell-off, TRST was a part of this group),” he says.

Stanley notes that over the past month, HEXO Corp. is up 23 per cent and Organigram is up 17 per cent, while TRST fell seven per cent. The analyst also gives a positive review of CannTrust’s decision last month to replace RSM as its auditor with one of the Big 4 auditors, KPMG, a move that should demonstrate the company’s growth and added credibility with investors.

Stanley has reiterated his “Buy” rating and $21.00 target price, which represented a 190 per cent return at the time of publication.