With a NASDAQ listing now in the works, cannabis LP Organigram (Organigram Stock Quote, Chart TSXV:OGI) should see more investor interest, says Beacon Securities analyst Russell Stanley who in an update to clients on Monday maintained his “Buy” rating with the raised target price of $15.00 (previously $13.00).
Moncton, New Brunswick’s Organigram announced on Friday that it has applied to list on the NASDAQ Global Select Market, a move which management says was spurred by increased investor interest from the US and internationally, attesting that the NASDAQ listing should enhance the company’s liquidity.
Stanley is taking the announcement as a positive for the stock, saying that it should broaden the investor audience.
“We are assuming that the application will be successful and are increasing our valuation multiple from 20x C2020E EBITDA to 23x,” says Stanley. “This brings it in line with the multiples we use to value HEXO Corp and CannTrust Holdings. We view OGI as highly comparable to HEXO and TRST, both of which obtained US exchange listings earlier this year.”
Stanley figures that OGI is now trading at 13x his calendar 2020 EBITDA estimate, which he sees as representing a 38-per-cent discount to its broad peer group average of 21x and a 66-per-cent discount to the 38x average of similarly-sized companies, meaning those with fully diluted market caps of $1 billion and over. As well, the analyst says OGI trades at an 82-per-cent discount to the 71x average at which other US-listed cannabis companies trade.
Going forward, Stanley sees Organigram generating fiscal 2019 revenue and Adjusted EBITDA of $110.1 million and $49.3 million, respectively, and fiscal 2020 revenue and Adjusted EBITDA of $202.5 million and $102.0 million, respectively. His $15.00 target represents a projected return of 71 per cent at the time of publication.