Cansortium is an undervalued US cannabis stock, Beacon says

Looking for a US cannabis play that’s travelling under the radar? Paradigm Capital analyst Corey Hammill has you covered with Florida-based Cansortium (Cansortium Stock Quote, Chart, News CSE:TIUM.U).

Hammill delivered a quarterly update to clients on Thursday where he reaffirmed his positive stance on the company, saying TIUM is still a “Buy” with a reiterated 12-month price target of C$1.25 per share.

Cansortium is a vertically integrated medical cannabis company with cultivation, processing, retail and distribution operations in its home state of Florida, along with expanding operations in Texas, Michigan and Pennsylvania. The company now has 21 medical dispensaries in Florida, having opened its 21st last week.

Cansortium announced its second quarter 2020 financials on Wednesday, posting consolidated revenue up 117 per cent year-over-year to $13.2 million and consolidated adjusted EBITDA of $2.6 million compared to a loss of $1.7 million a year ago. The Q2 also featured a net loss of $5.5 million or $0.03 per share compared to a loss of $5.3 million or $0.03 per share a year ago, while TIUM ended the quarter with $5.2 million in cash and about $65 million in net debt. (All figures in US dollars except where noted otherwise.)

In the commentary, management noted that TIUM completed its exit from non-core markets in Canada and Puerto Rico and reiterated its 2020 financial outlook, which calls for revenue in the range of $55 to $60 million (at least $45 million of which should be coming from its Florida operations) and adjusted EBITDA of more than $15 million.

On the quarter, CFO Marcos Pedreira said in a press release, “We delivered strong results during the second quarter of 2020. Revenue more than doubled from a year ago and we continue to make significant improvements to deliver the 2020 projected financial results.”

In his report, Hammill said TIUM’s Q2 revenue at $13.2 million was a slight beat of the consensus $12.1 million. On Cansortium’s expansion efforts, Hammill noted that TIUM should end 2020 with 25 Florida dispensaries compared to competitors Trulieve at 56 dispensaries in the state and Curaleaf with 32.

“Despite its improving fundamentals and upbeat outlook, Cansortium continues to underperform relative to its Florida peers,” Hammill wrote. “The company is on track to achieve several milestones, including an improved balance sheet, near-term growth in Florida, Pennsylvania and Michigan, while Texas remains a big opportunity for the long-term given the company’s position as the holder of one of three licenses in the state.”

“Cansortium shares closed at $0.34, down ~24 per cent YTD versus Florida leader Trulieve up 78 per cent. TIUM remains one of the least expensive names in our MSO tracking basket, trading at ~0.6x consensus 2021e sales, compared to MSO peers trading at an average of 2.5x,” Hammill wrote. “Based on 3x our 2021e sales and 15x EBITDA (both unchanged), we maintain our $1.25 target price.”

Looking ahead, Hammill has slightly lowered his 2020 projections, now calling for revenue of $55.5 million (previously $59.0 million ) and EBITDA of $16.3 million (previously $16.8 million).