Columbia Care is deeply undervalued: Beacon Securities

US cannabis play Columbia Care (Columbia Care Stock Quote, Chart, News NEO:CCHW) gets a positive review from Beacon Securities analyst Russell Stanley on its announcement of a collaboration with a UK pharmaceutical manufacturer for the import of Columbia’s proprietary BeneCeed CBD tablet.

In an update to clients on Thursday, Stanley reiterated his “Buy” rating and C$14.00 target price, which at time of publication represents a projected 12-month return of 120 per cent.

New York-based Columbia on Thursday announced that it had entered into a collaboration with both UK medical cannabis company Grow Bioteh and IPS Specials, a compounding pharmaceutical manufacturer, importer and distributor of products in the United Kingdom and the rest of the EU. The agreements could make BeneCeed the first botanical cannabinoid investigational medicinal product (IMP) approved for import from the US and the first of Columbia’s proprietary products to be studied in randomized clinical trials.

“For years Columbia Care has been working to set the standard in the cannabis industry by building a portfolio of proprietary, precisely formulated, pharmaceutical-quality cannabis-based medicines that patients can rely on to safely and efficiently address their unmet medical needs. With the initiation of the first placebo-controlled clinical trial examining one of our proprietary cannabis-based medicines in a major underserved behavioral health population, I am proud that we are now raising the bar once more with our funding and independent research partners as we move closer to reaching this momentous milestone for our Company,” said Rosemary Mazanet, M.D., Ph.D., chief scientific officer of Columbia Care, in a press release.

Stanley says the UK’s National Institute for Care Excellence has recommended that more clinical trials be carried out before cannabis products are made available on the National Health Service.

“We view the progress positively, and note that the UK represents another beachhead for Columbia Care in Europe, in addition to the company’s interests in Malta. This also demonstrates CCHW’s relatively unique focus and strength in developing products recognized by the pharmaceutical industry,” writes Stanley.

Columbia, now with interests in 14 states and active operations in ten, announced last week the completion of its acquisition of the remaining 25 per cent minority interest in its Illinois operation, making it 100-per-cent owned under its Columbia Care Illinois subsidiary. Stanley says that the acquisition is well-timed, with the planned opening of the state’s adult-use market this coming January and the expansion of its medical program.

The analyst estimates that Columbia Care is now trading at 6x his fiscal 2021 EBITDA estimate, which represents a 27-per-cent discount to its broad peer group average of 9x and a three-per-cent premium to the average among other US operating cannabis companies.

Stanley sees upcoming catalysts in updates on the company’s buildout progress, adult-use approval for the company’s dispensary in Boston, potential M&A activity and the company’s third quarter results in November.

Stanley thinks that Columbia Care will generate fiscal 2019 revenue and attributable EBITDA of $87 million and negative $42 million, respectively, and fiscal 2021 revenue and attributable EBITDA of $307 million and $52 million, respectively. (All figures in US dollars unless noted otherwise.)

Earlier this month, Columbia announced its fiscal second quarter results which featured revenue of $19.3 million, a 102 per cent increase year-over-year and adjusted EBITDA of negative $11.4 million.