iAnthus Capital has a 109 per cent upside, Beacon Securities says

Beacon Securities analyst Russell Stanley likes the new deal between US cannabis company iAnthus Capital Holdings (iAnthus Capital Stock Quote, Chart CSE:IAN) and Maryland-based and female-oriented medical cannabis company Blissiva, saying that the partnership highlights IAN’s expansion efforts.

In a note to clients Thursday, Stanley reiterated his “Buy” recommendation and C$16.00 target price for iAnthus, pointing out that the new deal will see IAN manufacture, market and sell a variety of Blissiva’s products in its markets, with an initial launch in Maryland on April 20, 2019.

“We view this positively as this will support the company’s goal of reaching (often overlooked) female customers in key markets across the country while utilizing IAN’s distribution network to create a national brand. This agreement follows the company’s recently announced intention to acquire CBD for Life for $15.7 million and highlights IAN’s efforts to expand its product offerings,” writes Stanley.

On Tuesday, iAnthus released its fiscal fourth quarter and full year 2018 financials, generating revenue of $4.5 million and an adjusted EBITDA loss of $18 million. Those numbers were stronger than Stanley’s estimates of a $3 million top line and $22 million EBITDA loss. (All figures in US dollars unless where noted otherwise.)

Stanley says iAnthus is trading at a marked discount to its peers.

“IAN currently trades at approximately 10x our estimate for C2020E EBITDA. This represents a 52 per cent discount to the 22x average of the broad peer group and a 73 per cent discount to the 39x average amongst companies with a C$1 billion-plus market capitalization,” Stanley writes.

The analyst sees IAN generating $25 million in Adjusted EBITDA in fiscal 2019 on revenue of $188 million and $121 million in Adjusted EBITDA on a top line of $341 million in fiscal 2020. His C$16.00 target represents a projected return on investment of 109 per cent at the time of publication.