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Vext Science is a triple, says Haywood

Haywood Capital Markets analyst Neal Gilmer likes the new expansion move by US cannabis company Vext Science (Vext Science Stock Quote, Charts, News, Analysts, Financials CSE:VEXT), which is looking to become vertically integrated in the state of Ohio. Writing in a Friday note to clients, Gilmer said Ohio presents an attractive medical market with significant upside potential in the event of adult-use legalization.

Vext Science, which has operations in Arizona, including leading dispensary the Herbal Wellness Center, the Vapen brand of THC cannabis products and hemp-based products under Pure Touch Botanicals, announced on Thursday the proposed acquisition of Appalachian Pharm Processing (APP) for a total consideration of $12.5 million, with $11 million paid in cash or promissory notes and $1.5 million in common shares. (All figures in US dollars except where noted otherwise.)

APP has a 25,000 sq ft cultivation facility and the potential to double in size, along with a processing facility. Concurrently, Vext announced a definitive agreement to acquire Buckeye Botanicals, which operates one retail dispensary in Jackson, Ohio, for a cash payment of $6.9 million. Vext said it has approval from the Ohio Board of Pharmacy to transfer ownership of the store and will operate it under the Herbal Wellness Center banner.

“While the overall macro backdrop will remain challenging for many operators, Vext’s track record of constantly innovating and offering a broad range of value-priced products has made Vapen one of Arizona’s top brands. These acquisitions will enable us to continue translating this success over to the Ohio market through the addition of a fully operational vertical footprint with plenty of room to scale,” said Vext CEO Eric Offenberger in a press release.

Vext said as part of the financing for the Ohio deals, it has entered into a loan agreement with an Ohio-based lender for a commitment of $10 million at an initial rate equal to the five-year treasury rate of 5.00-plus per cent, with a maturity in ten year and a 25-year amortization.

Gilmer said he views the deal and financing positively and sees them as consistent with his earlier expectations on Vext’s plans for Ohio. He updated his model on Vext to include the details and has increased his estimates on the company, but with the financing and share issuance the end result is a maintained target price. Gilmer reiterated a “Buy” rating on VEXT and C$0.70 target, which at press time represented a projected one-year return of 204 per cent.

Gilmer is now calling for Vext Science to deliver 2022 revenue of $36.1 million and EBITDA of $15.8 million, followed by 2023 revenue of $52.7 million and EBITDA of $20.0 million.

“We believe Vext has established a solid track record in Arizona with impressive profitability. Continued execution and entry into the Ohio market through with vertical operations upon closing of the transaction should unlock further shareholder value in out view,” Gilmer wrote.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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