Investors looking for exposure to the U.S. cannabis sector should take a long look at SLANG Worldwide (SLANG Worldwide Stock Quote, Chart CSE:SLNG) says Clarus Securities analyst Noel Atkinson.
In a research report to clients Thursday, Atkinson initiated coverage of SLNG with a “Speculative Buy” rating and a one-year price target of $5.00, implying a return of 137 per cent at the time of publication.
Atkinson says SLANG already has a foothold in the potentially lucrative U.S. market, while expansion seems imminent.
“SLANG Worldwide is one of the largest “branded” cannabis companies in the U.S.,” the analyst explains. “While other multi-state operators promote their efforts to capture state licenses for future revenues, several of SLANG’s cannabis products already hold leading segment market shares in key U.S. states such as California, Colorado and Massachusetts. We expect aggressive organic revenue growth over the next few years as SLANG adds further products, increases their market share of dispensaries in current territories, and expands into additional states.”
Atkinson thinks SLNG will post Adjusted EBITDA of $12.2-million on revenue of $82.3-million in fiscal 2019. He expects those numbers will improve to EBITDA of $113.7-million on a topline of $417.4-million the following year.
“We expect aggressive revenue growth through the acquisition of the rest of Organa Brands (estimated consolidated C$60MM total revenues in 2018), new product lines (including possibly a CBD platform), higher dispensary penetration in existing markets, and distribution agreements to enter more states,” the analyst adds. “SLANG generates revenue from cannabis consumables in 10 states currently, and we expect that to grow to 16 states or more by the end of 2019. While other “multi-state operators” (MSOs) seek to focus on high-capital-cost vertically-integrated businesses in a handful of states, SLANG can wholesale or license its products nationwide with very modest capex requirements. SLANG currently carries an attractive valuation (using CY2020e estimates that assume the Company exercises its exclusive options to acquire the remainder of Organa Brands in 2019) relative to the U.S. MSO and Canadian LP tracking groups. We believe SLANG has lower execution risk than the U.S. peer group due to the nature of its business model.”
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