The marijuana market in Florida is heating up in 2019, with Miami-based Cansortium (Cansortium Stock Quote, Chart CSE:TIUM.U) looking like a true winner, according to Paradigm Capital analyst Rahul Sarugaser who in a client update on Friday is staying bullish on the company after its quarterly earnings.
The first full quarter as a public company, Cansortium’s first quarter 2019 results arrived on May 30 after market close, coming in with a top line of $5.5 million and an EBITDA loss of $9.9 million. (All figures in US dollars unless noted otherwise.)
CEO Jose Hidalgo said that since the end of Q1 the company has tripled its Florida cultivation capacity with a new facility in Tampa and now hopes to go from ten to 30 dispensaries by the end of the year.
“We expect 2019 to be a year of expansive growth and we are reaffirming our previous full year outlook. Our team is focused on positioning the Company and the Fluent brand to capitalize on rapidly expanding opportunities in the U.S., while laying important groundwork for future expansion in international markets,” said Hidalgo.
Sarugaser notes that for the rest of the year, much of the company’s anticipated growth will come from Florida as well as contributions from Michigan and Canada, with the analyst scaling back on management’s prediction of 40 Florida stores to 23 by year’s end.
The analyst contends that Cansortium is trading at a discount to its US MSO peers. For example, he says that TIUM is currently trading at 5.6x 2019 Sales whereas the broader peer group is trading at an average of 8.1x 2019 Sales.
“Between TIUM’s proven ability to execute its multi-jurisdiction build-out and the outstanding quality of growth opportunities available (i.e., Texas), we remain bullish on near-term revenue growth despite a more conservative 2019 revenue forecast,” says Sarugaser.
“TIUM has some of the strongest fundamentals and highest potentials for growth of any cannabis company we have analyzed, worldwide. With world-class regulatory expertise, the intense growth of its current markets, and an ever-expanding footprint of gold-standard operations, we believe TIUM is poised to become an eminent global cannabis company. All of this being true, TIUM trades near the lowest multiple of its entire peer group, making the investment proposition for this company undeniable,” he says.
Sarugaser is maintaining his “Buy” recommendation and target range of between $2.40 and $3.40, which would represent a projected 12-month return range of between 45 and 106 per cent at the time of publication.
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