Canopy Rivers has 156 per cent upside, says PI Financial

Cannabis investment platform Canopy Rivers Inc (Canopy Rivers Stock Quote, Chart TSXV:RIV) gets approval from PI Financial analyst Devin Schilling for entering into a new credit facility for up to $80 million with its 49 per cent owned PharmHouse Inc, money which will go towards the acquisition and prep construction costs of a 1.3 million sq. ft. greenhouse in Leamington, Ontario.

“We believe Canopy Rivers represents best-in-class exposure to the emerging global cannabis sector,” says Schilling in a corporate update on Tuesday. “We remind investors that the PharmHouse JV partner’s family-owned and operated affiliated entities have been in the greenhouse produce business for over 60 years and have annual sales of over $1.5 billion. This represents one of the largest greenhouse operators in North America.”

The investment arm of Canopy Growth, Canopy Rivers began trading on the TSX Venture on September 20 after closing a $104-million private placement earlier in the year. The new $80-million loan from Bank of Montreal and CIBC represents one of the largest yet in the cannabis space.

“We believe the commitment made by these leading Canadian financial institutions demonstrates confidence in PharmHouse and sheds meaningful light on the quality of the infrastructure, the level of expertise of the joint venture partners, and the anticipated significant near-term cash flow of this platform,” says Bruce Linton, chairman and CEO of Canopy Rivers, as well as founder, chairman and Co-CEO of Canopy Growth Corp, in a press release.

Schilling says PharmHouse should get its cultivation license by Q2 of this year, with significant ramp-up by the end of 2019 and aiming at a total of 130,000 kg per year. Overall, he rates the impact of the event as a positive, maintaining both his “Buy” rating and $9.00 target price for RIV. His target represents a 156 per cent projected return at the time of publication.