HEXO Corp’s (HEXO Stock Quote, Chart TSX:HEXO) listing on the NYSE will commence next Wednesday, according to an announcement today by the company, with analyst Russell Stanley of Beacon Security treating the event as a positive.
Stanley, in a research update to clients Thursday, said that with only five other Canadian cannabis producers currently listed in the United States, the expanded investor audience will benefit HEXO.
“We continue to view HEXO as one of a few companies that combine large-scale, low-cost production with strong product development/commercialization capabilities,” says Stanley. “This makes it an ideal target for would-be strategic investors/acquirers from other industries (e.g. alcohol/tobacco/pharmaceutical, etc). Today’s NYSE announcement (and next week’s actual listing) could help put HEXO on additional radar screens, for both strategic and financial investors.”
Gatineau, Quebec’s HEXO Corp has a smaller footprint than companies like Canopy Growth and Aurora Cannabis but it maintains the largest supply agreement with the province of Quebec and it aims to have its annual production ramped up from the current 25,000 kg to more than 108,000 kg upon bringing its facilities to full operation.
Stanley says HEXO trades at 10x his EV/2020 EBITDA estimate, which compares favourably to the other five Canadian cannabis companies trading in the US at an average of 68x and the broad peer group average of 19x.
The analyst forecasts a 2019 Adjusted EBITDA loss of $3.9 million on revenue of $100.7 million and a positive Adjusted EBITDA of $116.5 million in 2020 on a top line of $315.9 million. Stanley is reiterating his “Buy” recommendation and $11.00 target, which represented a projected return of 77 per cent at the time of publication.