A large follow on order from The Green Organic Dutchman has solidified EnWave’s (EnWave Stock Quote, Chart TSXV:ENW) place in the cannabis space, says Industrial Alliance Securities analyst Neil Linsdell.
This morning, EnWave announced it had sold three more large-scale radiant energy vacuum (REV) machines to cannabis company The Green Organic Dutchman.
“The agreement further validates the benefits of REV technology as a turnkey solution for rapidly drying cannabis and hemp at low temperatures to provide a high-quality cannabis product. The agreement also further expands the use of EnWave’s REV technology within the rapidly growing global medicinal and recreational cannabis market. EnWave’s strategy is to commercialize its proprietary REV technology throughout the global cannabis sector under its licensing and royalty business model,” the company said in a press release.
Linsdell says follow-on order could raise ENW’s profile in the cannabis space.
“This order from TGOD provides solid support for our forecasts in F2019 and solidifies EnWave’s position in the cannabis drying space,” the analyst says. “We expect this announcement to prompt other cannabis producers to consider or accelerate their review of EnWave’s value proposition, and to provide a boost to EnWave’s royalty revenue stream as commercial production ramps-up.”
In a research update to clients today, Linsdell maintained his “Buy” rating, but raised his one-year price target on EnWave from $2.35 to $2.80, implying a return of 38.9 per cent at the time of publication.
Linsdell thinks ENW will post Adjusted EBITDA of $8.4-million on revenue of $42.7-million in fiscal 2019. He expects those numbers will improve to EBITDA of $13.8-million on a topline of $58.1-million the following year.
Cannabis, says Linsdell is becoming a significant segment of business for the company, which is well known for its cheese snack product Moon Cheese, a top-seller a retail outlets such as Costco.
“EnWave entered the cannabis drying space with Tilray in October 2017,” he explains. “Tilray has ordered three units to date with a combined capacity of 130kW. TGOD’s order this morning will bring its machine count to four with a combined capacity of 420kW. There is one other (unnamed) cannabis LP that has been evaluating the REV™ technology and that we believe could become EnWave’s third partner in the sector. Additionally, existing partner Your Wasabi Farms (Private) recently expanded its license to use its REV™ unit to include drying industrial hemp.”