In a June 12 update to clients, analyst Noel Atkinson maintained his “Buy” rating with the new target of C$12.75 (was C$12.50).
Last week, TerrAscend announced the closing of its $36.8-million purchase of the Apothecarium’s California operations, with the acquisition of its Nevada operations expected sometime in the third quarter of this year. (All figures in US dollars unless noted otherwise.)
The California purchase includes three dispensary locations in San Francisco, a Berkeley location which is zoned and under construction, an undisclosed fifth location somewhere in the Bay Area as well as Valhalla Confections, an edibles company.
Atkinson says that while California’s cannabis sector remains highly fragmented, with 631 active licenses for cannabis dispensaries, the pipeline for expansion in the state remains robust.
“We believe the California cannabis sector is not overbuilt. There are about 63,000 Californians per licensed dispensary, versus about 25,000 people per dispensary in Nevada, 15,000 in Washington, 7,500 in Colorado and less than 7,000 people per dispensary in Oregon (the other large mature adult-use states),” says Atkinson.
Atkinson says closing the California deal with the Apothecarium makes TerrAscend one of the largest retail dispensary operators in the Golden State and that the sooner-than-expected closing of the deal is cause for a raise in his estimates.
The analyst thinks TerrAscend will generate fiscal 2019 revenue and adjusted EBITDA of $142.5 million and $4.5 million (previously $136.3 million and $1.0 million) and fiscal 2020 revenue and adjusted EBITDA of $372.2 million and $96.5 million (was $365.5 million and $91.9 million).
Atkinson’s C$12.75 target represented a projected return of 90.3 per cent at the time of publication.
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