In a report on Tuesday, the analyst reviewed the numbers and held on his “Buy” rating and $9.00 target, saying RIV represents best-in-class exposure to the emerging global cannabis sector.
Canopy Rivers on Wednesday announced its fourth quarter fiscal 2019 financials ended March 31, 2019, coming in with total operating income of $6.1 million, EBITDA of $0.07 million and fully diluted EPS of negative $0.02 per share.
The fiscal year was full of milestones for RIV, according to president and CEO Narbe Alexandrian.
“Anchored by our go public transaction and listing on the TSX Venture Exchange, eight new investments, and landmark transactions for certain portfolio companies, we have strategically positioned ourselves as an accelerator of growth for companies that we believe are situated to be leaders in the cannabis industry,” wrote Alexandrian in a press release.
Although he says RIV’s valuation at this stage is largely based on its net asset value and less on its quarterly financials, Schilling noted that the company generated $2.6 million from royalties, interest and lease payment over its Q4, beating his forecast of $2.4 million. The EBITDA of $0.07 was also better than his estimate of a $0.6 million loss. Schilling also pointed to RIV’s cash balance at quarter-end which was $104 million, enough for the company to pursue further investments in the global cannabis sector, according to the analyst.
Schilling argues that RIV is trading at a significant discount to its peers.
“As of yesterday’s closing price, RIV’s market cap (fully diluted) was $658 million with $104 million in cash, $134 million of publicly traded investments, and $37 million of private investments held at cost. This implies an EV of $383 million for the ~$100 million in total attributable EBITDA estimated from its private joint venture production assets not included above and represents a 3.8x multiple versus the peer group average of 11x. This significant discount excludes any value for RIV’s existing royalty streams, which if included, would imply an even lower multiple,” said Schilling.
The analyst is calling for fiscal 2020 total operating income of $11.7 million and EPS of negative $0.05 per share. For fiscal 2021, he estimates total operating income of $16.1 million and EPS of negative $0.02 per share. His $9.00 target represents a 12-month projected return of 199 per cent at the time of publication.