US cannabis stock Trulieve Cannabis (Trulieve Cannabis Stock Quote, Chart, News, Analysts, Financials CSE:TRUL) was a winner over the past year, returning about 175 per cent over the\past 12 months. So, what’s the scoop for TRUL going forward? Lots more upside, according to Beacon Securities analyst Russell Stanley, who in a client report on Wednesday reasserted his “Buy” rating and C$90.00 target for Trulieve. At press time, Stanley’s target represented a projected twelve-month return of 90 per cent.
Trulieve Cannabis is the largest licensed cannabis company in the state of Florida, with 85 dispensaries and a dominant market share. Outside Florida, TRUL has six more cannabis retail stores and holds licenses to operate in California, Massachusetts, Pennsylvania, Connecticut and West Virginia.
The company announced on Wednesday the commencement of operations in West Virginia with the planting of its first crop at TRUL’s 100,000 sq ft cultivation and manufacturing facility in Huntington. Having legalized medical marijuana in 2017, West Virginia is only now starting up medical sales and has so far issued licensing for ten cultivation operations, ten processing facilities and 100 dispensaries.
According to state officials, West Virginia had a little over 2,300 residents registered under the medical cannabis program as of a June 30 deadline for receipt of a three-year registration card. Along with its Huntington facility Trulieve also has, via de novo application wins and acquisitions, licensing in the state for nine dispensaries.
“West Virginia patients have been waiting on medical cannabis for some time, and we are happy to announce we have planted our first crop,” said Trulieve CEOKim Rivers in a press release.
“As we have demonstrated in our home state of Florida, Trulieve is dedicated to providing meaningful access to patients. We look forward to introducing the Trulieve brand in the state, providing patients with the highest quality products to meet their medical needs,” Rivers said.
On Trulieve’s West Virginia expansion, Stanley said he expects TRUL to be a major player in the market out of the gate.
“While we are not making material changes to our forecast at this time, our estimates assumed that WV would not begin contributing to revenue until F2022, so the progress suggests upside to our F2021 forecast,” Stanley wrote.
By the numbers, Stanley is calling for TRUL to generate 2021 and 2022 revenue of $876 million and $1,820 million, respectively, and 2021 and 2022 adjusted EBITDA of $395 million and $753 million, respectively. (All figures in US dollars except where noted otherwise.)
Trulieve in May announced a definite agreement to acquire US multi-state operator Harvest Health & Recreation in a proposed $2.1-billion deal. Harvest Health has its presence mostly on the West Coast and Northeast regions of the US, with Trulieve saying the combined company would have 126 dispensaries across 11 states and a combined 2020 adjusted EBITDA of $266 million and a 2021 consensus adjusted EBITDA of $461 million.
Trulieve recently announced that the proposed deal had cleared the 30-day waiting period under the Hart-Scott-Rodino (HSR) Act, clearing a path on the federal level for the deal to go through. Meanwhile, Harvest Health recently delivered notice of its annual general and special shareholder meeting to be held on August 11, where Stanley says shareholders will likely be asked to approve the proposed all-stock acquisition.
“The transaction requires approval from two-thirds of the votes cast by HARV shareholders, while holders of 55 per cent-plus of the total voting power have entered agreements to support the transaction, according to filings. We therefore believe the odds of closing are high,” Stanley wrote.
“As of writing, HARV is trading at an approximate 6.7-per-cent discount to the implied value of the offer. We view this as a very modest discount for cannabis M&A, which we believe indicates the stock is priced as though the deal is highly likely to be consummated,” he said.
Stanley estimated TRUL to be currently trading at a 21 per cent discount to its peer group.
“Notwithstanding HSR clearance and the pending shareholder vote, the F2022E EBITDA estimates used to calculate consensus exclude the HARV transaction. Our forecast is one of two that includes HARV, and both are excluded as outliers. TRUL now trades at 9x our F2022 EBITDA forecast, representing a 21-per-cent discount to the 12x average at which US operators trade,” Stanley wrote.
Year-to-date, Trulieve’s share price is currently up 16 per cent.
On Thursday, Trulieve announced the completion of its acquisition of Keystone Shops, which has a permit to operate dispensaries in Pennsylvania with locations in Philadelphia, Devon and King of Prussia. The total cost of the deal is $60 million, to be paid in $20 million in cash and the rest in shares.
“Keystone Shops operates three strategically-located dispensaries in the Greater Philadelphia area and, with its staff’s knowledgeable and customer-centric approach to patients, this will be a valuable and exciting addition to our growing Pennsylvania portfolio,” Rivers said in a press release.